Chilean economy gains momentum in the 3Q17

Low inflation, expansionary monetary policy, improving private sentiment and higher copper prices will aid the recovery.

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Activity strengthened in the third quarter of the year. The rebound of mining activity is currently the main driver behind better growth figures; however, non-mining activity has shown some consolidation as well. The Imacec (monthly proxy for GDP) grew 1.3% year over year in September (2.4% in August), close to our 1.5% forecast and the 1.6% market consensus. Once corrected for seasonal and calendar effects, growth in September was somewhat higher at 1.8% (2.2% in August). Overall, Imacec rose 2.2% in the third quarter, up from the 0.9% in 2Q17. At the margin, activity accelerated to 6.1% qoq/saar from 3.1% in 2Q17 and 0.3% in 1Q17, boosted by mining, which sped up to 44.8% qoq/saar (2Q17: +26.2%; 1Q17: -24.4%).

Low inflation, an expansionary monetary policy, improving private sentiment and higher copper prices will all aid an activity recovery. We expect growth of 1.7% this year (1.6% in 2016) and a pick-up to 2.7% next year. As shown in the central bank’s recent business perception report, the outcome of the general election will likely have a significant influence on confidence and consequently on investment decisions and growth. Still, business confidence is already rising: although it completed 43 consecutive months in pessimistic territory, business sentiment posted the largest year-over-year gain since dipping below the neutral level of 50 points in April 2014. ** Full story here.

We published our Chile Scenario Review for the month of November. Having revised our copper price forecasts up, we now see the CLP ending the year at 650/USD (665/USD previously), and 660/USD by the close of 2018 (675/USD previously). Higher copper prices are consistent with a narrower current-account deficit (1.2% of GDP for 2018, from 1.4% in our previous scenario). Low inflation, an expansionary monetary policy, improving private sentiment and higher global growth will all aid an activity recovery. ** Full story here.


We published our Mexico Scenario Review for the month of November. We have revised our GDP growth forecast for 2017 (to 2.1%, from 2.3%) in response to the slowdown observed in 3Q17 (largely explained by the one-off effects the earthquakes). Moreover, we now expect annual CPI inflation at 5.9% by the end of 2017 (from 5.7% in our previous scenario) because inflation for core goods (tradables) is falling slower than expected. ** Full story here.


Inflation expectations for 2018 remained stable at 4.02%. According to Focus survey, inflation did not change for 2017, 2018 and 2019 at 3.08%, 4.02% and 4.25%, respectively. Year-end Selic expectations also remained flat for the three years horizon, at 7.00% for 2017 and 2018, and 8.00% for 2019. GDP growth expectations did not change for 2017 (at 0.73%), and also remained flat for 2018 and 2019 (both at 2.50%). Finally, the BRL was virtually flat for 2017 at 3.20/USD (from 3.19/USD); for 2018 at 3.30/USD; and for 2019 at 3.33/USD (from 3.34/USD).


Commodities Monthly Review: Higher copper prices, lower agricultural prices. Commodity prices rose in October, boosted by 4.4% increase in its energy subcomponent. We increased our yearend copper and nickel forecasts. On the other hand, we lowered our forecasts for agricultural prices. In all, we expect a 5.3% drop in the ICI from its current level by year-end, led by metal and energy prices. ** Full story here.

Fuente: ITAU BBA

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