Finance news

Chilean industrial production fell the most since 1999 in January as durable goods, textiles and metal manufacturing plunged, raising concern the economy will shrink in the first half of the year.

Output declined 8.9 percent in January from the same month a year earlier, the National Statistics Institute said today in statement distributed in Santiago. The drop was nearly twice the median forecast of a 4.8 percent decline in a Bloomberg survey of economists. Production last fell more in July 1999.

“This confirms that the economy contracted in January,” said Rodrigo Aravena, an economist at Banchile Inversiones in Santiago. “The Chilean economy will suffer a recession in the first half of the year. Economic policy, both fiscal and monetary, will continue to be aggressive.”

The economy has stalled as demand for Chilean exports dries up and the price of copper, its biggest export, slumps. Economic activity probably contracted 0.5 percent in January, according to a Bloomberg survey of five economists, the biggest decline since Chile’s last recession in 1999.

The central bank is scheduled to report economic activity on March 5.

Rates, Stimulus

The central bank cut its policy rate by 2.5 percent to 4.75 percent in February and may reduce the rate to 2 percent by year- end, Deutsche Bank AG said Feb. 24.

Goldman Sachs Group Inc. expects the bank to cut by 75 to 100 basis points when it meets on March 12, economist Alberto Ramos wrote to clients today. A basis point equals 0.01 percentage point.

“Activity is decelerating very fast and is now clearly below trend,” Ramos wrote. “The central bank is likely to continue cutting rates aggressively as the output gap is widening.”

Chile’s President Michelle Bachelet on Jan payday loan online. 5 announced a $4 billion package of tax breaks and subsidies aimed at stimulating the country’s economy.

The plan will be entirely paid for by tapping Chile’s $20.2 billion stabilization fund, which in composed of copper savings, the Finance Ministry said Feb. 23.

Projections, Jobs

Chile’s budget chief, Alberto Arenas, reiterated the government’s forecast that gross domestic product will expand at least 2 percent this year.

The government is working “full-time” on the stimulus plan and will start handing out 40,000-peso ($67.05) bonuses to poor households from March 2, he said.

“These figures aren’t a surprise,” he told reporters today. The economy “is going to be slower in the first half. It will accelerate in the second half. We stick by the forecasts that we made at the beginning of the year.”

Government spending on infrastructure will directly create 120,000 jobs, Arenas said. The plan will contribute 1 percentage point to growth in 2009, he said. Arenas is acting finance minister while Andres Velasco takes time off.

Joblessness rose to 8.0 percent in the three months ending in January, up from 7.5 percent in the same period a month earlier, the statistics institute said today. The number of people out of work rose to 580,340 from 515,820, the institute said.

Industrial sales plunged 9.4 percent in January, the institute said, the biggest decline since April 1999.

The peso declined 0.1 percent to 596.75 per dollar at 1:39 p.m. New York time from 596.22 yesterday.

Source

Filed under: finance by Finance Boss