(Recasts; adds comments, forecast for economic activity)
By Anthony Esposito
SANTIAGO, Oct 29 (Reuters) - Chile’s sluggish economy likely rebounded in September after official data showed a surprise jump in factory output, but analysts and the government urged taking Wednesday’s figures with a grain of salt before declaring victory over the slowdown.
Manufacturing production rose 5 percent from a year earlier, the biggest increase in nearly two years. But retail sales contracted for the first time since the mid-2009 recession, and copper production also fell 5 percent from September 2013.
Manufacturing growth easily beat forecasts for a 0.8 percent rise and was a pleasant surprise for President Michelle Bachelet’s government, which has had a hard time defending structural reforms to taxes and education during the economic slowdown in Chile, the world’s top copper producer.
“This result is due mainly to an increase in activity in the food and beverages division, in particular strong dynamism in the production of carbonated drinks and the salmon industry” and to a lesser degree due to greater production of medicines, the government INE statistics agency said.
The economy likely posted its largest monthly growth since May, according to the median estimate of 14 analysts and economists polled by Reuters after the data was released,
They estimated a 2.0 percent September increase in the IMACEC economic activity index, a proxy for gross domestic product. That would be a sharp jump from the 0.3 percent growth registered in August.
But the September data was distorted as two extra working days boosted manufacturing output, while two fewer holidays hurt retail sales, said Goldman Sachs economist Tiago Severo.
“By averaging the growth rate over last two months ... you see things aren’t deteriorating significantly. The economy might be hitting bottom, but it’s too soon to say that there is a turnaround,” Severo added.
“I’d like to see two to three months of solid figures to say the economy is heading in right direction.”
The government also cautioned against focusing too much attention on one month’s economic data, reiterating that it saw a recovery towards the end of the year and expected an improved 2015.
“It’s important that we have a turnaround in the manufacturing sector (but) with macroeconomic data you need to be prudent,” said Finance Minster Alberto Arenas. “We have to look at the trend, which is more important than the specific numbers themselves.”
GDP is expected to be near 2 percent in 2014, following a 4.1 percent expansion last year. The government predicts 3.6 percent growth next year, helped in part by a planned public spending surge.
To counteract falling investment and cooling domestic demand, the central bank cut its benchmark interest rate by 200 basis points over the last year, but indicated earlier this month it would put its easing cycle on hold. (Reporting by Anthony Esposito; Editing by Richard Chang)