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Economy in Brief

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding
by Carol Stone May 23, 2007

Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.

Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.

The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we've indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the "nested function" feature of the new DLXVG3, now in internal testing here at Haver. We've also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database "code" for the series to signal to the analyst that calculations are in "nested" mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.

On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following "just" 2.3%, while imports grew 10.0% compared with 8.3%.

CHILE (% Changes) Q1 2007(SAQR*) Q4 2006 (SAQR*) Q3 2006 (SAQR*) Year/Year 2006 2005 2004
Real GDP 3.0 2.0 -0.3 5.8 4.0 5.7 6.0
Copper Industry 5.3 6.7 -4.5 7.1 0.1 -2.5 4.5
Private Consumption 3.9 1.3 1.3 7.7 7.1 7.9 7.0
Gross Fixed Investment 5.2 0.6 3.0 7.9 4.0 21.9 9.9
Exports G & S 6.2 -1.0 3.1 9.5 4.2 3.5 11.7
Imports G & S 3.8 2.6 2.5 10.0 9.4 17.7 16.9
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