Chile Stuns Markets as Unemployment Falls, Manufacturing Rises

Matthew Malinowski

(Bloomberg) -- Chile’s jobless rate fell and manufacturing output rose late in the year, surprising analysts who had forecast a steep downturn as nationwide protests shuttered businesses and delayed investments.

The unemployment rate slid to 6.9% in the three months through November from 7% in the month-earlier period, the national statistics institute said Tuesday, far below the 7.6% median estimate of analysts surveyed by Bloomberg. Manufacturing expanded 3.2% in November from a year ago, compared with the median estimate for a drop of 5%.

Chile is grappling with more than two months of violent anti-government demonstrations that have seen hundreds of shops looted or burnt and public transport severely disrupted. The statistics agency reported a 9.8% slump in retail sales for November today, in line with estimates. Yet, the agency also said retail was one of the areas that boosted employment, along with construction and health-care.

In construction, “the increase could deflate in the next few months given that the sector is closely tied to investment, which we don’t expect to be positive this year,” said Martina Ogaz, an economist at EuroAmerica in Santiago.

Local media reported this month that the number of firings due to “company needs” has exceeded 100,000 since the start of upheaval.

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The increase in manufacturing output was driven by the chemicals industry, principally methanol output, and the production of machinery and equipment.

“While it’s a positive figure, my impression is that this could be transitory given the depressed nature of much of the manufacturing sector,” Ogaz said.

Industrial production slid 1.8% in November from the year earlier, the statistics agency also reported Tuesday, less than the 3.7% contraction forecast by economists. Copper output totaled 504,366 tons, compared with 540,742 in the same month last year.

President Sebastian Pinera has pledged billions of dollars to appease the protesters and rebuild the economy. Still, the central bank has warned that unemployment will likely surge to more than 10% early next year.

Read More: Chile Central Bank Warns of Recession Risk in Model Economy

The protests began in October over a rise in the price of metro fares before ballooning to include much broader demands. Pinera initially called in troops and established a curfew before reversing course and agreeing to a plebiscite on a new constitution.

In an interview with newspaper La Tercera published on Sunday, Pinera said the worst of the country’s crisis has past and vowed to unveil reforms in the next few days. Meanwhile, the peso has strengthened by more than 10% since the end of November amid central bank intervention after previously hitting a record low.

--With assistance from Eduardo Thomson and Maria Jose Campano.

To contact the reporter on this story: Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, Philip Sanders

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