Chilean economic growth rebounds sequentially in Q2, construction sector remains a drag

Chile’s economic growth expanded in the second quarter when compared with the prior quarter. The economy expanded 0.9 percent year-on-year and grew 0.7 percent quarter-on-quarter. The construction sector continues to impede the rapid growth of economy. The construction output, which is a vital sector of the economy, dropped 3.7 percent year-on-year and 1.3 percent quarter-on-quarter.

The second quarter result indicates that the economy has continued to suffer from its linkages to the remainder of the work and is probably one of the few economies that has not gained from the improvements in global economic activity. Moreover, the ailments of the Chilean economy indicate how difficult it is to expand in the current global economic environment if the economy is not diversified in production. Although mining output rebounded in the second quarter on sequential terms, it continued to drop, falling 3 percent.

Even if the economy disappointed in the second quarter, the consumption figures were not as bad as the overall performance indicates. Personal consumption expenditures rose relatively strong at 2.6 percent on a year-on-year basis, while imports of goods and services rose sharply by 7 percent. This performance signified that domestic demand rose 3.9 percent on a year-on-year basis.

But gross fixed capital formation continued to drop, falling 4.1 percent on a year-on-year basis. This will continue to restrict the ability of the Chilean economy to expand at stronger rates in the near term. The reason for this decline was a 6.5 percent drop in investment in the construction industry, while investment in machinery and equipment recorded a slight rise of 0.1 percent year-on-year.

In the meantime, exports of goods and services continued to indicate weakness with a drop of 3.5 percent year-on-year. Every export sector in Chile is weak, signifying that Chile has not been able to take advantage of the improvement in global economic activity, noted Wells Fargo in a research report.

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