Chile Second QTR GDP Up 4.1 Percent, IPSA/Peso Fall
Chile GDP for the second quarter 2013 rose 4.1 percent year-over-year and first quarter’s number was revised up from 4.1 percent to 4.5, making the first half of 2013 up 4.2 percent.
SANTIAGO – The number was just over expectations for an up 4.0 percent but the Chilean stock market, IPSA index, was down on the news as was the peso.
The Central Bank report attributed mining and retail as the main drivers. Mining makes up approximately 15 of the country’s GDP. Retail sales were up 10.6 percent in the second quarter. Whereas manufacturing was down 1.2 percent in the same period.
Copper investment was up 9.3 percent for the second quarter year-over-year, but lower than the first quarters 9.5 percent growth, although the price of copper has come off its recent lows is still down about 10 percent for the year.
Even though the GDP number was a slight bit better than expectations, it did show a continued slowdown in the economy, which saw GDP at 5.6 percent in 2012. The IPSA reacted to the downside, dropping as low as 3,702.95, down 1.5 percent, in mid-day trading, just above the psychological 3,700 mark.
The peso dropped to a new 52-week low in mid-day trading, off a similar percentage amount of 1.4, to CL$519.49. The peso has now lost 11.8 percent from just last May, 3 months ago.
Helping to push the peso down is that US interest rates have been spiking as of late. Today the US 10-year rate hit 2.89 percent, up from just a week ago’s 2.55 percent, and dramatically up from, again, last May’s 1.61 percent rate.
The US rates are moving up as their economy is improving to the point where it is anticipated that US Federal Reserve will be “tapering” their bond buying stimulus program. There is an important annual Fed meeting in Jackson Hole this week where all eyes will be on the different Fed governors and what they will be saying about the stimulus program.
A slowing economy and a stronger dollar from high rates continue to fuel speculation as to when the Chile Central Bank will lower their rate which they have held steady at 5.0 percent for 19 months.
A slowing Chinese economy is also pushing copper prices down slightly today, down about 1 percent to US$3.32 per pound. Thoughts are that when the US “tapers” there will be less export opportunities to China, i.e. less demand for copper from Chile.