A tale of two realms: economic silence and political noise
The Chilean economy has grown rather uneventful. Macroeconomic data points to a balanced economy with limited growth potential. National accounts for Q1 2025 confirm that growth is mostly export-led, while investment remains weak. Gross fixed capital formation growth y/y was positive in Q1, but the pace slowed from Q4 2024, and fell short of GDP growth. Private consumption increased in Q1 2025, in line with the rise in real wages. The good news is that retail sales bounced back this March.
The labor market remains soft. Early-year gains faded in the January–March rolling quarter. with employment stagnating and the unemployment rate holding steady at elevated levels. Beyond seasonal noise and a mild uptick, there’s little evidence of sustained momentum. Since July 2024, real and nominal wages have posted steady y/y gains. Unit labor costs —average wage growth adjusted for labor productivity— have been signaling mild aggregate labor cost pressures, driven by the successive minimum wage hikes.
Inflation has now held above 4% for 10 months straight. We continue to expect it to fall below that threshold by Q4 2025, largely on the back of base effects. Core inflation readings reinforce the fact that underlying price dynamics are closer to the Central Bank’s target than the headline figure implies. The main source of medium-term uncertainty is the trajectory of global tariff policy, and its impact on investor and consumer confidence.
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