Chile: Lower commodities prices bring risks of negative Q2 GDP growth

Chile's economy is slowing. The industrial production index printed a sharp decline of 1.2% y/y, driven by negative growth in the manufacturing and mining sectors, while the index for utilities increased slightly. Manufacturing contracted 3.3% y/y on a decline in the basic metals, food & beverage, and paper sectors. The mining sector fell 0.4% y/y, mainly driven by lower iron extraction given the continued decline in its international price. 

On the demand side, retail sales increased 3.1% y/y, led by electronic goods and textiles, partially offset by a contraction in car sales, influenced by the weaker currency. Finally, the monthly GDP proxy expanded by 0.8% on an annual basis, decelerating markedly from the 2.6% growth rate a year ago. 

"We see a risk that Q2 15 will actually contract in q/q terms, with our tracker at -0.5%, below our 0.5% expansion forecast and compatible with 1.5% y/y growth," said Barclays in a report on Friday.