(Bloomberg) — Chile’s economy expanded at the fastest pace in six months in July as investors bet the central bank will resume its cycle of gradual interest rate cuts to further support growth.
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The Imacec index, a proxy for gross domestic product, rose 1% on the month, just above the 0.9% median forecast in a Bloomberg survey of analysts and the most since January. From the year earlier, activity gained 4.2% the central bank reported Monday, the fastest pace in over two years.
Policymakers are expected to lower borrowing costs by a quarter-point on Tuesday after having paused their easing cycle in their previous meeting. July’s activity increase comes as good news following a dismal second quarter, when GDP contracted. Both the government and private-sector analysts still see the economy expanding over 2% in 2024.
Industrial output jumped 4.4% on the month in July, while services gained 1.6%, according to the central bank. On the other hand, mining declined 2.5% during the period.
Borrowing costs have tumbled from an over two-decade high of 11.25% in 2023 to the current level of 5.75%, supporting consumption. On the other hand, business confidence remains below historical levels, high long-term rates are stifling real estate sales and inflation has also accelerated in recent months.
Retail sales, industry and manufacturing all posted year-on-year gains in July, the national statistics institute reported in a separate release last Friday.
In the second quarter, GDP contracted by 0.6% from the prior three months, marking its first such decline in a year. That downturn was driven by a 1% drop in mining.
This Wednesday, the central bank will publish its latest quarterly monetary policy report with updated estimates on growth and inflation.
–With assistance from Giovanna Serafim.
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