Chile GDP Q1 2008

Chile's gross domestic product expanded at the slowest pace since 2003 in the first quarter with mining output falling substantially and a drought cutting hydroelectricity supplies. Chile's economy expanded 3 percent in the first quarter from the year-earlier period, down from the 4 percent rise achieved in the previous quarter.



In fact the economy grew 5.8 percent in the first quarter on a working day adjusted basis - ie taking into account public holidays etc (since easter was in March this year) - so the headline number isn't quite as bad as it looks.

Indeed, quarter on quarter, GDP was up by 1.4% on a seasonally adjusted basis.



The worst drought in 50 years in Chile lowered hydropower reserves as shortages of natural gas curtailed output by generators, resulting in a slowdown in economic activity and industrial production. Industrial output as measured by the National Statistics Office was down 0.1% year on year in March.



Mining output declined 2.7 percent because of labor disputes and lower yields from mines. Copper output fell 8.4 percent in March from a year earlier. According to the central bank output from the utility industry dropped 16 percent. Electricity generation fell 2.2 percent in March because of the drought and gas shortages.

Chile Inflation April 2008

Chilean annual inflation fell back slightly in April, registering the first decline in a year, with consumer prices rising by 8.3 percent over April 2007 , compared with an 8.5 percent rise in the 12 months through March, according to the National Statistics Institute. Consumer prices rose 0.4 percent in April from the previous month, led by food.

Today's inflation report will likely allow the central bank to keep its benchmark lending rate unchanged at its monthly meeting later this week.



Central bank policy makers voted unanimously on April 10 to keep rates at a six-year high of 6.25 percent for a third month, and changed the bias on their policy statement to neutral, removing a sentence from its previous statement that said it could not rule out raising rates again.

The central bank aims to keep inflation in a 2 percent-to-4 percent target band. The bank changed its bias to neutral partly because leaving it unchanged for three consecutive months would weaken its message, according to the minutes released last week.

In the year up to April, the price of rice rose 8.9 percent, bread increased 8.5 percent while beans and lentils rose 6.2 percent, the institute said.

One other factor which may well be in the minds of central bank decision makers is the fact that Chile's economy expanded in March at the slowest pace in almost six years - growing by just 0.7 percent - down from 5.6 percent in February according to the Bank of Chile IMACEC index.



The worst drought in 50 years has cut hydropower reserves as natural gas shortages curtail output by generators, slowing economic activity and industrial output, the National Statistics Institute said on April 30. Electricity generation fell 2.2 percent in March, which had two fewer working days than March 2007.



Chile's economy last expanded at a slower pace than that registered in March back in June 2002, when it slowed to 0.51 percent from 0.68 percent May 2002.

In the first quarter of 2008, the Chilean economy expanded 3.1 percent year-on-year compared to a year-on-year expansion of 6.2 percent in the first quarter of 2007, the central bank said.