Chile’s economic growth slowed in August 2024, with the Imacec economic activity index rising by 2.3% year-on-year, a marked decline from the stronger 4.2% growth in July.
This data, released by Chile’s Central Bank, has sparked concerns about a potential economic slowdown, highlighting sector-specific shifts that could impact the nation’s growth prospects.
Chile economic activity: mixed performances across sectors
The drop in economic activity can largely be traced to mixed performances across different sectors.
Goods production saw a modest increase of 2.8% in August, down from 3.4% in July.
Manufacturing, in particular, struggled, with growth slipping to 2.7% from a robust 7.8% the previous month.
This drop in manufacturing output underscores concerns about the sustainability of growth in this critical sector.
Other areas of goods production also faced declines, with a contraction of 1.6%, reversing from the small 0.9% growth in July.
These figures suggest growing vulnerabilities in the non-mining segments of the economy, as demand for manufactured goods weakens.
Conversely, the mining sector remained strong, showing an 8% growth in August, compared to 3.6% in July.
The mining industry’s continued expansion is vital to Chile’s export strength and is key in stabilizing the economy.
As one of Chile’s most important industries, its positive performance helped mitigate the broader economic slowdown.
Chile economic activity: service sector under pressure
The service sector, another key component of Chile’s economy, showed signs of weakening. Its growth slowed to 1.9% in August, a steep drop from 5.3% in July.
This sluggish expansion in services is concerning, as it suggests a slowdown in consumer spending and sentiment, both of which are critical indicators of broader economic health.
Similarly, the trade sector showed signs of strain, with growth slowing to 3% in August, down from 4.9% in July.
This reduction reflects potential weaknesses in domestic demand, heightening concerns about the future trajectory of the economy.
Should this trend continue, Chile could face a prolonged period of economic stagnation.
Monthly fluctuations and concerns
The seasonally adjusted monthly data provides additional cause for concern.
Economic activity shrank by 0.2% in August, reversing the 1% increase seen in July.
This contraction, although small, signals underlying vulnerabilities in the economy that could lead to more significant slowdowns in the months ahead.
July’s earlier performance, buoyed by a 4.2% year-on-year gain, was likely inflated by an additional working day that month.
This underscores the volatile nature of Chile’s economic performance, with July’s gains masking deeper, structural issues that may be causing the current downturn.
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