(Recasts, adds analyst’s comments, forecast for July economic growth, context)
By Anthony Esposito
SANTIAGO, Aug 29 (Reuters) - Chilean factory output tumbled for the fifth time this year in July, while retail sales growth slowed to a trickle, adding to signs that an economic slowdown in the top copper exporter is deepening.
Manufacturing production fell 4.1 percent in July from a year earlier, government data showed on Friday, a significantly larger drop than a Reuters poll forecast for a 2.3 percent fall.
Retail sales, a gauge of consumer demand, increased 1.5 percent in July versus a year earlier, the slowest pace of growth since at least 2009, when the economy of the world’s top copper producer was in the throes of a recession.
The slowdown, sparked by a fall in mining investment and consumer spending, led gross domestic product to grow at its weakest pace in five years in the second quarter.
“In July, a greater deterioration of domestic economic activity was observed ... meanwhile, a continued deceleration in domestic consumption was observed, as reflected in a marked downward trend in retail sales,” the INE statistics agency said.
Manufacturing production grew 3.6 percent on a sequential basis in July from June, but in seasonally adjusted terms slipped 0.1 percent in July.
The market is now expecting near flat growth in the economy in July.
Chile’s IMACEC economic activity index, a proxy for GDP, is expected to have grown 0.2 percent in July from a year ago, according to a Reuters survey of 16 analysts and economists polled following the release of Friday’s data.
That would be the weakest monthly growth since March 2010, right in the aftermath of a devastating earthquake and tsunami.
Despite the economic slowdown, Chile’s jobless rate for the May-to-July period remained steady at 6.5 percent, INE data showed.
“The soft leading indicators of activity in July confirm the economy continued to lose momentum in the third quarter 2014,” said Tiago Severo, an economist at Goldman Sachs.
“The persistent slowdown in retail sales, particularly sales of durable goods, amid a still healthy labor market reinforces the perception that subdued expectations have been an important drag on domestic demand and activity lately,” Severo said.
Consumer sentiment turned negative for the first time in two years in June.
The central bank has cut the benchmark interest rate 150 basis points since October in an attempt to reverse the slowdown, and recently said economic recovery will be slower than previously expected.
The bank currently forecasts growth of between 2.5 percent and 3.5 percent this year, though that is likely to be downgraded when it gives new quarterly estimates next week. (Editing by Rosalba O‘Brienm, Jeffrey Benkoe and Andrew Hay)