Soft data and hard politics
IMACEC volatility remains high, reinforcing the need to interpret monthly prints from a wider perspective. GDP results confirmed a soft third quarter. Mining disruptions were the main drag, but private consumption growth also moderated. Although the most recent data look stronger, we interpret it cautiously, given high m/m volatility. Gross fixed capital formation maintained a sequential expansion comparable to that of the post-pandemic recovery. As we have stressed, these strong investment figures are explained by machinery and equipment investment, which is mostly imported, and largely directed to existing large mines. By contrast, construction investment decelerated. External accounts added little: in Q3, mining disruptions left exports broadly flat in real terms. October trade figures already show a recovery, due to the normalization of mining production, together with further increases in copper prices.
After two months of favorable figures, the labor market has cooled. Employment continued to expand, but at a considerably slower pace, though the seasonally-adjusted unemployment rate held at 8.4%, pausing the prior downward trend. Real wage levels were essentially unchanged for the second consecutive month.
October’s CPI downside surprise does little to alter our near-term inflation outlook, but it adds a mild downward tilt to the 12-month cumulative figures. October’s CPI was heavily influenced by Cyber Day discounts. Core inflation also surprised on the downside, though by less than the headline. Meanwhile, services inflation remains persistent.
Expectations have been converging toward a 25bp cut to the TPM in December. The minutes of October’s Monetary Policy Meeting reinforce a cautious stance. But many of the elements that prevented a cut at that meeting have since eased. A key contribution of the minutes is their explicit outline of the variables the BCCH monitors when assessing inflation risks. The minutes also provide an important signal on neutral rate estimates.
Chile’s right celebrated a historic electoral triumph, yet its apparent victory quickly revealed deep vulnerabilities. Despite José Antonio Kast’s likely presidential win, the right lacks congressional majorities, and will depend on Franco Parisi’s Party of the People (PdG), whose emerging middle-class base demands fairness, social mobility and pragmatic solutions, rather than ideology. The PdG’s digitally driven, grassroots structure seems to be responding to broader demographic shifts. While its voters probably lean closer to Kast, they are not reliably right-wing, and legislative gridlock looms. Unless Kast shows unprecedented flexibility—and the left abandons its obstructionism—his victory risks becoming a triumph that sows its own defeat.
Now read on...
Register to sample a report