A very soft landing, with plenty of turbulence
Chilean economic activity has been moving away from the protracted decline observed in the second half of 2022. The Monthly Economic Activity Index surprised positively in January. The breakdown by sectors showed widespread improvement. Nevertheless, services continued to lead the way. The real question is whether consumption can be sustained, or if it is destined to collapse. Household purchasing power is clearly declining, but there is still some wiggle room that could help prevent a major consumption drop.
February numbers confirmed the recovery of the trade balance. Exports decreased, and the monthly value of imports was at its lowest since April 2021. This helps correct one of the major disequilibria in the Chilean economy.
The labor market continued to weaken in the November-January rolling quarter. Private non-farming employment saw its largest monthly decline since July 2020. The unemployment rate rose slightly in the November-January rolling quarter, consistent with seasonal patterns. Real wages have been falling.
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