Chile's growth likely decelerated in Q2 despite improvement in June

Chile's economy grew at the fastest pace in five months in June at 2.7% yoy. Yet, given the earlier growth weakness, we compute that the economy grew at 1.7% yoy in Q2 (as against our old projection of 2.4% 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 istherefore more likely to grow close to 2.2-2.3% in 2015, as against our earlier forecast of 2.6%", 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 and 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.