A Sleepy Summer
The economy was off to a better-than-expected start in 2017. In the 12 months to January, the Monthly Index of Economic Activity (Imacec) expanded 1.7%. Yet activity is still weak. Correcting for the number of business days, the Imacec in January grew by a modest 1.5% y/y. Imacec in February will be depressed by the strike at BHP Billiton’s La Escondida mine.
Retail sales were relatively vigorous in December and January. Yet excluding car sales, retail sales expanded by only 1.9% y/y. Industrial production disappointed again, and the 12-month variation in mining production also returned to negative territory.
The Monthly Index of Business Confidence rose in February, for the third consecutive month, to an 11-month high. But confidence remains weak. Markets may be betting on having a more market-friendly government after November elections.
Unemployment has started to reflect labor market realities. The 6.2% of the November-January mobile quarter was the highest for this period in five years. Moreover, meager employment growth was driven by self-employment. In January, wage and labor cost growth continued to slow.
Workers at La Escondida, the world’s biggest copper mine, have been striking for more than month. Financial losses for both the company and the country are enormous. Labor laws may help stem losses. Yet the new regulations will be enforced only starting on April 1st. Considering Chile’s tough economic situation, that seems like a bad idea, and badly-timed.
Beyond the occasional surprise, the analytical indices resumed their general decline. The February CPI reaffirms that inflationary pressures are dissipating. The analytical indices not only resumed their downward trajectory, but all are also below 3%.
The Central Bank was procrastinating over a rate cut until February. In March, as widely expected, the Bank cut its Monetary Policy Rate (TPM) by 25 bps, leaving it at 3%. Now the question is whether the TPM will fall to 2.75% or 2.5% before yearend.
Political parties are struggling to renew party rosters, to meet new conditions for federal funding. Most established parties are far from achieving the 18,250 member threshold by the April 14th deadline. Unsurprisingly, newer parties have been more successful. The effects of failing to meet these conditions -- placed by their own members of Congress last year -- could be dramatic, leading to public questioning of their proposed presidential candidacies, or worse, to party dissolutions.
Now read on...
Register to sample a report