Chile’s mining recovery boosts February trade surplus

In February, the trade balance recorded a USD 1.25 billion surplus.

Talk of the Day


Chile posted another large trade surplus in February, keeping Chile’s current account deficit low. In February, the trade balance recorded a USD 1.25 billion surplus, falling in between the Bloomberg market consensus of USD 1.1 billion and our USD 1.5 billion forecast. Smaller industrial and agricultural exports explain our surprise. The trade surplus far exceeded the USD 0.2 billion posted one year ago. It was led by mining (as prices and volume recover), but there was a generalized improvement in exports. As a result, the 12-month rolling trade surplus increased to USD 8.5 billion, from USD 6.9 billion in 2017 and USD 5.3 billion in 2016. Our seasonally adjusted series show that, at the margin, the trade balance surplus ticked up to a sizable USD 10.2 billion (annualized) in the rolling quarter (USD 10.1 billion in 4Q17).

Mining drove exports in February. Total exports gained 36.4% over twelve months (from 19% in January), with mining exports gaining 53.4% (9.3% one month earlier). A low base of comparison due to the extensive strike early last year favors mining export growth. Agriculture exports rose 38.8% yoy (59.5% in January), while industrial exports posted 15.2% growth (17.1% previously). Import growth remains elevated, rising 14.3% in February (11% in January). Consumer and energy imports are the main drivers, while capital goods imports returned to growth for the first time since November. Total consumer goods increased 15.1% (19.0% previously), with the slowdown attributable to the durable and semi-durable components. With the high international fuel prices, energy imports increased 17.1%, up from 13.2% in January. Meanwhile, the recovery of capital goods imports to 6.6% (-5.5% previously) is due to buses and electronics. At the margin, imports increased 29.1% qoq/saar, a similar pace recorded in 4Q17. Accelerating consumption goods have offset slowing energy import growth. We expect Chile’s external imbalances to stay low. We expect the current account deficit to narrow to 1.2% of GDP, from the 1.5% estimated for 2017. ** Full Story here.

Day Ahead: February’s inflation data will be released at 8:00 AM (SP Time). We expect consumer prices to have gained 0.1% in the month (consensus: 0.2%), leading to an annual inflation of 2.0% in the month (consensus: 2.1%).


Private consumption weakened in 4Q17, moderating over the course of 2017 as the negative effects of falling real wages (due to the spike of inflation) and less-dynamic consumer credit were only partly offset by a solid labor market. The monthly proxy for private consumption grew 1% yoy in December, which implies a 2.2% yoy expansion in 4Q17 and an annual growth rate of 3% in 2017 (from 4.2% in 2016). According to calendar-adjusted data reported by the statistics institute (INEGI), the monthly proxy for private consumption grew 2% yoy in December and 2.4% yoy in 4Q17 (from 3.2% in 3Q17). Even though the seasonally-adjusted index advanced 1.3% month-over-month in December, qoq annualized growth slowed down to 2.1% in 4Q17 (from 2.7% in 3Q17). Notably, this contrasts with retail sales data which showed a sequential rebound (2.1% qoq/saar in 4Q17, from -2.6 in 3Q17). In fact, the natural hazards that battered the economy in 3Q17 likely had a more detrimental effect on retail sales than on total private consumption, as the sequential payback was much larger in the former than in the latter. We note that the latter is a broader indicator, better correlated to consumption in GDP.

We do not expect much further slowdown of private consumption in 2018, so growth will likely remain moderate. On the positive side, the real wage bill is improving sequentially, driven by lower inflation and stable employment growth. In fact, the growth of the real wage bill stood at 4.3% qoq/saar in January (from an average of 2.9% qoq/saar in 2017). We see inflation decreasing to 3.7% by the end of 2018 (from 6.8% in 2017). However, the uncertainties associated to NAFTA renegotiation and the presidential elections are affecting consumer confidence. Finally, tight monetary policy curbs consumer credit growth. ** Full Story here.

Day Ahead: INEGI will announce February´s CPI inflation at 11:00 AM (SP Time). We expect a 0.40% month-over-month variation (consensus: 0.41%). Assuming our forecast is correct, headline inflation would decrease from 5.55% year-over-year in January to 5.35% year-over-year in February (consensus: 5.37%).


Day Ahead: The Central Bank of Peru (BCRP) will hold its monthly meeting to decide on the reference rate. We and the consensus believe the board will cut the reference rate by 25bps (to 2.75%). The decision will come out at 10:00 PM (SP Time).

All LatAm

Itaú Inflationary Surprise Index: Balanced surprises in February.Our Itaú Inflationary Surprise Index decreased to 0.02 in February, coming from 0.08 in January, and now is at neutral territory. The main contributions to the retreat of the general index came from the components of Brazil and Mexico. In the first case, January´s inflation surprised to the downside with a result weaker than the floor of market expectations. In contrast, inflation in Chile surprised to the upside at the beginning of the year, influenced by the components of food, housing and transportation. The result of January puts a high bias on our inflation forecast in Chile by the end of the year (2.5%).
** Full Story here.

Fuente: ITAU

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