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Domestic side of the economy shows improvement in the second quarter
The disappointing June reading left second quarter growth a notch short of
the 1.8% expected by the Consensus last month. The 1.7% annual growth
rate, represents an insignificant improvement over the 1.6% expansion
registered in the first quarter this year and confirms the dependence of
the Chilean economy on more favourable developments of the global economy
in order to pull clear from sluggish growth. However, while the overall
economic performance remained virtually unchanged from the first quarter,
the second quarter reading brought some notable improvements on the
domestic side of the economy. Domestic demand declined at an annual rate
of 0.4%, a huge improvement when compared to the 2.7% contraction recorded
in the first quarter this year. The improvement is due to a swing in gross
fixed investment, which reverted from a 1.3% decline in Q1 to a – still
moderate – 0.9% expansion in Q2. The remainder of the domestic demand,
i.e. consumption and change of inventories (the Central Bank publishes
isolated consumption data only on an annual basis) also improved notably
as the 3.8% contraction gin the first quarter gave way to a more subdued
0.8% decline. The improvement on the domestic side of the economy was
partially compensated for by a deteriorating net contribution of the
external sector as imports reverted from a strong 6.6% contraction in Q1
to a 2.9% growth in Q2. Export growth, on the other hand, picked up more
moderately, from 6.0% in the first quarter to 8.6% in the second quarter.
Healthy expansion of electricity among abundant
water supplies
On a sectoral basis, agriculture and fishing led growth, expanding 4.9%
and 5.1% respectively over the same period last year(Q1: 3.4% and 15.4%
respectively year-on-year). The only sector that grew at a faster clip,
was the electricity, gas and water sector, which increased by 5.6%
compared to the second quarter 2001. In the first quarter, the sector grew
4.5%. However, the performance was fostered by favourable climatic
conditions as the plenty rainfalls provided the mostly hydroelectric power
plants with abundant resources. Gas and water actually both declined
moderately over the same quarter last year. Industrial manufacturing also
improved obver the 0.4% growth in the first quarter by adding 1.5% on an
annual basis. Mining and construction, on the other hand, deteriorated
compared to the performance in the first quarter. The decline of the
mining sector of half a percentage point in Q1 deteriorated to a full 3.0%
contraction amid output adjustments of state-owned production facilities
and large private sector mining operations. Thus, mining constituted the
only sector entrenched in negative territory. While construction still
expanded 2.6%, the pace actually constitutes a slowdown when compared to
3.4% annual growth in the first quarter. Nevertheless, the above average
growth rate was mainly driven by public sector works, in particular by
engineering contracts related to concessions. In the private sector,
construction activity was particularly pronounced in energy and mining.
The services sector, in total, increased by 1.6%, following on 1.8% growth
in the first quarter. Basically, all sub-sectors in services developed
along the lines observed in the first quarter.
More detailed information
available at the Chilean Central Bank
(Banco Central de Chile).
Forecasts: This indicator is covered in the
LatinFocus Consensus Forecast. For 5-year projections, including quarterly forecasts for
the next two years, please click here
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