by Antonio De la Jara and Moises Avila
Reuters ???Translate This Article
29 September 2012
SANTIAGO - Chile's manufacturing and copper output soared in August from July and the country's jobless rate sank to its lowest in six months, buoyed by domestic consumption and increased import demand, primarily from Brazil and the US, the government said on Friday.
Chile's stronger-than-expected economic performance has helped drive its peso currency up more than 9.5% against the US dollar this year. Together with the Hungarian forint, it ranks as the strongest performer against the dollar among the 152 currencies tracked by Reuters.
Early Friday, after the release of the surprisingly strong production data, the central bank warned it was not ruling out intervening in the foreign exchange market, which it did last year, to stem the peso's rise.
Following the remarks, the peso retreated against the dollar, and was trading about 0.6% lower on the day at about 474 to the dollar. Manufacturing output increased a seasonally adjusted 6.8% in August from July and rose a larger-than-forecast 3.6% from a year earlier on improved domestic and external demand conditions, according to the National Statistics Institute (INE) report on Friday.
Chile's jobless rate for the June to August period fell to 6.4% on jobs in public administration and defense, teaching and mining, easing from May to July's 6.5% level to its lowest since December to February's 6.4% rate. 'We think the data released today shows favorable growth in local activity and doesn't display evident signs of contagion on the back of international problems,' BICE Inversiones said in a note to clients.
Copper is the backbone of the Chilean economy, making it highly export-dependent. But so far it has resisted the fallout of euro zone debt woes and slowing demand from China, its leading copper customer, better than previously forecast.
INE cited improved conditions for 'external demand are explained by the exports of products like salmon and trout, mainly to Brazil and the US.'
Domestic demand was boosted by the use of metal-based products, such as railings and fences, in real estate projects, it added.
A low unemployment rate, brisk domestic demand and strong economic activity, weighed against a threatening global backdrop, are seen pressuring the bank to keep its key interest rate at 5% in the near future, and not reduce it to stimulate economic growth, as has been the case recently in Latin American peers Colombia and Brazil.
The central bank is seen holding the rate at 5% again at its monetary policy meeting on October 18, and it is also seen at that level in three and six months, the bank's fortnightly poll of traders showed on Wednesday.
A Reuters poll had seen manufacturing output growth at 1% in August from a year ago on waning external demand and a strong domestic currency exporters say dull their competitive edge globally. The unemployment rate was forecast to have remained unchanged at 6.5 percent, according to the median response of ten analysts and economists polled by Reuters.
COPPER OUTPUT JUMPS
Chile lynchpin copper output jumped in August, both compared with the same month of last year and with July 2012. Chile produced 462 643 t of copper in August , jumping 7.8% from the same month a year earlier due to a low base of comparison and a higher current productive capacity, the government also said on Friday.
Copper output in August of last year was hit by the tail-end of a massive strike at world No 1 copper deposit Escondida, majority owned by BHP Billiton.
Production of the metal rose 11.7% in August 2012 from a month earlier, boosted by higher rates of mineral-processing and better ore grades, the INE added.
Red metal production reached 414 339 t in July, a 9.8% jump from the same month a year earlier, also due to a low base of comparison and higher productive capacity, the government said last month. But copper output sank 8.5% in July compared with June on the maintenance of conveyer belts and grinding equipment.
Chile, which produces around a third of the world's copper, is struggling to boost its key copper production despite stubbornly dwindling ore grades in old mines, labour action, energy woes and operational troubles.
The Andean country produced 3.52-million tons of copper in the January to August period, a 4% increase from the same period of 2011.
Chile is seen mining 5.4-million tons this year, significantly down from a previous projection of 5.7-million tons.
But analysts and industry players are increasingly questioning whether Chile will be able to meet its ambitious mining production and investment aims. 'Considering that no new operations are due to start before year-end, maintaining August's rhythm would mean an annual output of 5.34-million tons ( 1.5% year-on-year), which is difficult if one takes into account Collahuasi's problems and generalised decreases in ore grades,' said Pedro Fuenzalida, a senior analyst with LarrainVial in Santiago.
Collahuasi, the world's No 3 copper mine, expects its red metal output to improve in the second half of the year versus the first six months, but its full-year output will likely still be below last year's, as lower ore grades and accidents hit operations.
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