Chile: GDP records sharpest contraction since Q2 2023 in the second quarter
GDP declined 0.6% on a seasonally adjusted quarter on quarter basis in the second quarter, contrasting the 2.1% expansion logged in the first quarter and marking worst result since Q2 2023. Weaker private and public spending drove the decline, more than outweighing higher investment and exports. On an annual basis, economic growth waned notably to 1.6% in Q2, from the previous quarter’s 2.5% expansion.
Private consumption contracted 0.3% seasonally-adjusted quarter-on-quarter in Q2, compared to a 1.4% expansion in Q1. Public spending fell 1.6% (Q1: +4.4% s.a. qoq). Meanwhile, fixed investment grew 1.4% in Q2, contrasting the 0.6% contraction logged in the prior quarter and marking the first expansion in five quarters. Exports of goods and services increased 2.9% in Q2, which was above the first quarter’s 2.2% expansion. Conversely, imports of goods and services growth waned to 0.3% in Q2 (Q1: +2.0% s.a. qoq).
The economy should return to growth in Q3, aided by loosening financial conditions thanks to 450 basis points of rate cuts by the Central Bank over the last year.
On the reading, Itaú Unibanco analysts said:
“The second quarter data confirmed the correction in activity momentum following the strong, and unsustainable, start to the year. Activity during 2Q came in below the BCCh’s June IPoM estimate of +2.6% YoY, reinforcing the downside risks to the activity outlook.”