Analysts followed by Bloomberg all had forecasted an increase but not as much as reported. Emol.com had shown a consensus forecast of a rise to 6.3 percent. In the last quarter the total employment decreased by 0.2 percent and the workforce increased by 0.3 percent.
Due to seasonality, agriculture decreased 5.6 percent whereas education increased 4.6 percent, which is ironic since public school teachers have been on strike for almost one month.
The INE report indicates that the hope for growth turn around was not materializing. Year-on-year growth in April was only 1.7 percent but the government was still looking at full year growth 2015 coming in approximately 4.0 percent citing 2.4 percent growth in the first quarter 2015 up from the fourth quarter 2014 at 1.8 percent.
In May, exports dropped 22 percent from the year earlier period and imports were also down 19 percent. May’s growth numbers will be reported on July 6.
The stalling of the economy has been weighing on the peso closing out the month of June just shy of CLP$640, down just over CLP$20 for the month. Potentially higher interest rates and threatened default in Greece have also contributed to the weakness.
The Chilean economy’s growth has additionally been affected by multiple strikes, political scandals and corporate tax violations, hurting consumer and investor confidence. Adding to the weakness has been that the Santiago area ski resorts are one-month late in opening, affecting many jobs and retail related sales reportedly off 30 percent.
Santiago Stock Exchange’s IPSA index has fallen since its 52-week high on May 11 at 4,144 to Tuesday’s close of 3,878, down approximately 6.5 percent.
The Central Bank has been curtailed in its effort to lower interest rates to spurn economic activity as inflation has continued to hover above their target range. Lower rates mean a lower peso, which increases import costs, i.e. increase in inflation.
The Central Bank is also looking with concern the slowing Chinese economy and the dramatic drop in their equity markets. China just last Sunday lowered interest rates for the fifth time since November and their equity markets have dropped to “bear-market” territory, down over 20 percent in less than one-month.