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SANTIAGO, Sept 5 (Reuters) - Chile's economy grew in July at its slowest pace in more than four years its central bank reported on Friday, but growth exceeded market forecasts, feeding hopes that a slowdown may be close to touching bottom.
Economic activity rose 0.9 percent in July from the same month a year ago, according to the central bank's IMACEC index.
With the upward revision of June's growth figure to 1.1 percent, the July reading was the weakest since March 2010, when Chile was suffering from the aftermath of a massive earthquake.
The market had expected a 0.2 percent rise in July, with some analysts predicting negative growth.
"The fall in manufacturing industry, retail sales and cars affected the result," the central bank said. "On the other hand, there was a positive performance from value-added services and mining."
A drop in mining investment in the top copper exporter sparked the slowdown, which has since spread to other parts of the economy. The central bank has predicted the economy will begin to turn around in late 2014, as it begins to feel the impact of monetary easing and a weaker peso.
The rebound will happen in the southern hemisphere summer, Finance Minister Alberto Arenas told journalists at a briefing on Friday.
"We are going to have a slow winter," he said.
Analysts said they expected further deceleration despite the upside surprise. A weaker labor market implied that consumption would continue to decline in coming months, said analysts at Banchile.
"We think that we haven't touched bottom, and give a preliminary prediction for an IMACEC in August of between zero and 0.5 percent," they said.
The unexpectedly better July reading, alongside weak employment data from the United States, pushed the peso over 1 percent higher against the dollar.
In comparison with June, economic activity increased a seasonally adjusted 0.5 pct.
The IMACEC economic activity index encompasses about 90 percent of the economy tallied in gross domestic product figures. (Reporting by Rosalba O'Brien and Anthony Esposito; Editing by W Simon, Paul Simao and David Gregorio)