Monthly Economic Update

Monthly Economic Update
March 30th, 2016
Nº 1
Patrons 2016
KEY EVENTS
The government has cut its economic
forecasts after a further drop in
copper prices at the end of 2015.
Finance Minister Rodrigo Valdes said
the economy is now expected to grow
by 2% this year, down from 2.75%
predicted previously, while the copper
price is expected to average US$2.15 a
pound during 2016, down from US$2.50
a pound. In response, Valdes said that
the government will trim spending
by around 1% or US$540 million
during 2016, compared to the budget
approved last November by Congress.
The Ministry of Health and welfare
benefits will not be affected by the cuts.
The drop in copper prices, together with
uncertainty among investors over the
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Sponsors 2016
changing regulatory and tax situation
in Chile had a dramatic impact on
investment into the country. According
to Central Bank data, Foreign Direct
Investment fell 46% in 2015 to US$11.8
billion, its lowest level since 2006.
Police have arrested the owners and
senior management of AC Inversiones,
a financial services company that
promised investors monthly returns of
7.5%. In fact, the operation is believed
to have act as a Ponzi scheme, with
investors being paid out of contributions
made by new members. At least, 5,000
individuals made investments with
the company which are believed to
total more than CLP 15 billion. The
government does not believe that
the fraud represents a threat to the
country’s financial system, but it has
highlighted gaps in the regulation of
Chile’s financial system.
On March 10th, the Senate voted
through government legislation to
overhaul Chile’s labour laws, giving
much greater powers to unions during
collective wage negotiations. The bill
must now return to the Chamber of
Deputies for final approval. Senators
only agreed to support the bill after
ministers introduced a further set
of modifications designed to better
protect the interest of small businesses.
However, a majority of senators
refused to back clauses which would
oblige companies to negotiate with
Scandinavian-style sector-wide unions.
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Monthly
Monthly Economic
Economic Update
Update
November 26th, 2014
March 30th, 2016
Nº 6
Nº 1
LATEST FIGURES
The Chilean economy grew by 0.3% in January, down
from 1.5% in December, according to the Central Bank’s
Monthly Indicator of Economic Activity. The bank said falls
in manufacturing and mining largely offset a more active
services sector.
Copper production fell 13.8% in January to 453,638 tonnes,
as operations mined lower grade ore or reduced production
in the face of low copper prices. Molybdenum production
rose 29% to 4,948 tonnes.
Manufacturing output fell by 4.6% in January, according to
the National Statistics Institute (INE), reflecting lower output
of base metals (ferromolybdenum), processed fruit, and
sawn and brushed timber. This was offset by higher output of
asphalt, tobacco and pharmaceuticals.
The three-month rolling-average unemployment rate held
at 5.8% in January, unchanged from December and down
0.4% from a year ago. Jobs were created in retail, agriculture,
and real estate, offsetting losses in teaching, domestic service
and mining.
Nominal wages rose 5.8% in the twelve months to January,
compared to 5.2% in December, with wages growing fastest
in hotels and restaurants, retail and personal services.
The rate of fiscal spending fell by 3.4% in January, after rising
7.4% in 2015. Fiscal revenues rose by 19.2% in the same
period, compared to 5.2% last year.
The Selective Share Price Index (IPSA) rose by 0.27% in
February, but fell 6.8% over the previous twelve months.
Trading volumes to CLP 855 billion, down 37.3% from January.
Retail sales in Santiago rose by 3.4% in January, compared
to twelve months earlier. INE attributed the increase to
improved sales of vehicles and clothing, offsetting falls in
fuels, pharmaceuticals and cosmetics.
In February, exports reached US$4.8 billion, down from US$5.1
billion in the same month last year, while imports dropped to
US$4.2 billion, down from US$4.5 billion in February 2015; as
a result, there was a monthly trade surplus of US$597 million
as compared to US$590 million twelve months earlier.
Consumer-price inflation rose by 4.8% in February,
compared to a year ago, exceeding the Central Bank’s 2-4%
medium-term target range, but down from 4.8% in January.
Core inflation (which excludes fresh fruit and vegetables and
fuels) was steady at 4.9%.
In February, the peso rose against the dollar, with the
exchange rate averaging 704 pesos/dollar as compared to 722
pesos/dollar in January. The dollar traded down from around
710 pesos/dollar in early February to 690 pesos/dollar by the
end of the month and is now trading below 680 pesos/dollar.
Business confidence rose in February with the Monthly
Indicator of Business Confidence (IMCE) published by the
ICARE business organisation and the Adolfo Ibáñez University
rising to 46.41 points, up from 44.99 points in January and its
highest level since June last year.
In February, the board of the Central Bank agreed to maintain
its nominal benchmark interest rate at 3.50% for a second
month. Although expectations for the global economy have
worsened, the bank remains primarily concerned by inflation,
which remained close to 5.0% in January and February. While
economic activity and internal demand remains weak in Chile,
unemployment has continued to fall.
Consumer confidence rose in February to 37.6 points, its
highest level since May 2015, according to the Index of
Economic Perception (IPEC), produced by GfK Adimark. Those
surveyed were more positive on all aspects of the economy,
particularly economic stability over the next five years.
Cámara Chileno Británica de Comercio A.G
Av. El Bosque Norte 0125, Las Condes
Teléfono: 2370 4106 / Fax: 2370 4164
[email protected] / www.britcham.cl
Economic Report Committee:
Peter Lynch, Regional Audit Manager, BHP Billiton Chile
Tom Azzopardi, Journalist
Guillermo Tagle, Partner & Executive Director, IM Trust & CO Holdings S.A.
Leslie Hemery, Partner, PwC Chile
Richard Cheney, Director, British Chilean Chamber of Commerce
Greg Holland, General Manager, British Chilean Chamber of Commerce