Chile economy likely contracted in Q2

Chile's economy grew at the fastest pace in five months in June at 2.7% yoy. Yet, given the earlier growth weakness, the economy grew at 1.7% yoy in Q2, the slowest growth in three quarters and a slowdown from 2.4% in Q1. 

"Moreover, the economy might actually have contracted on a sequential basis in Q2 (-0.1% qoq) vs growth of 1.0% qoq in Q1. Based on the numbers in H1 the economy is therefore more likely to grow close to 2.2-2.3% in 2015", says Societe Generale.

On average, the economy is on a downward trend and it's difficult to factor in a quick and strong recovery given the fact that external demand weakness persists. The economy's growth at the moment is sustained by the government's significant counter-cyclical spending. 

It would be interesting to reflect on the details of the Q2 demand composition to gauge the progress on the investment front. An improvement in external demand and a sustained surge in investment growth is the prerequisite for a recovery of growth.