Base effects contributed to a strong recovery in real retail sales, while weak manufacturing dynamics persisted. Retail sales (including vehicles) rose by a sharp 4.4% MoM/SA, snapping back from the 2.3% fall in May, leading to an annual increase of 7.9% YoY (+1.2% in May), well above market expectations and our call (Bloomberg consensus: 4.0%; Itaú: 4.3%). Driving the transitory retail boom were electronics and apparel, boosted by the online sales event (“Cyber”) during the month (held one month earlier in 2023). In contrast, manufacturing fell 1.0% MoM/SA, leading to an annual contraction of 4.8% (-2.5% in May), well below market consensus and our call (Bloomberg: -1.6%, Itaú: +1.0%). Manufacturing was dragged mainly by food products, specifically fish and seafood production. Mining posted a sequential increase of 1.5% MoM/SA, leading to a 2.2% YoY change. Utilities rose 0.9% YoY (boosted by hydroelectricity generation). As a result, industrial production (grouping manufacturing, mining, and utilities) fell 0.4% MoM SA, consistent with a 1% YoY drop (+2.3% in May). We expect an IMACEC increase in May of 1.8% (to be published on August 1; 1.1% in May).
Retail sales were strong in the second quarter. Total retail sales increased by 4.2% during 2Q (2.2% in 1Q), with durable retail sales rising to 8.8% YoY (2.9% in 1Q) and non-durable goods increasing 3.2% (3.2% in 1Q). Total industrial production rose 1.2% in the quarter (3.8% in 1Q), with manufacturing falling 0.4% YoY (+3.9% in 1Q), but mining up 2.7% (4.5% in 1Q). In seasonally adjusted terms, manufacturing fell 10.6% QoQ/saar (+0.8% in 1Q), and overall industrial production dropped 6% QoQ/saar. Retail sales increased 3.0% (+9.1% QoQ/saar in 1Q).
Our take: Despite transitory effects aiding activity dynamics during June (online sales event; higher seasonal rainfalls increasing the value added to electricity production), overall activity dynamics underwhelmed in 2Q24, placing a downside risk to our 2.8% GDP growth call for the year. We project the monthly GDP proxy to rise by 1.8% YoY in June (to be published by the BCCh on August 1, the day after the monetary policy meeting), which would take 2Q24 growth to 2.1% YoY, below the 2.6% implicit in the BCCh’s June IPoM. Furthermore, the significant inflationary shock from the electricity prices increase, rising inflation expectations, will lead the BCCh to close off this phase of the easing cycle with a 25bp cut to 5.5% at today’s monetary policy meeting.
Andrés Pérez M.
Vittorio Peretti
Ignacio Martinez Labra