Chile's weak metal prices and mining sector slow down likely to contract Q2 GDP

The slowdown in the mining sector, which has been driven by weak metal prices, suggests a contraction of Chile's GDP in Q2

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. 

"With these data, a risk can be foreseen that Q2 15 will actually contract in q/q terms, which might be at -0.5%, and compatible with 1.5% y/y growth", forecasts Barclays.