UPDATE 1-Chile economic activity up just 0.8 percent in May, short of forecasts
(Adds detail, background, market reaction)
SANTIAGO, July 6 (Reuters) - Chile's economic activity rose 0.8 percent in May from the same month a year ago, much slower than expected, raising questions over the pace of economic recovery in the top copper exporter.
The reading of the IMACEC economic activity index , which encompasses about 90 percent of the economy tallied in gross domestic product figures, pointed to the worst performance since August 2014, and compared with forecasts for a 1.5 percent rise.
The growth was driven by services, with manufacturing, mining and retail all contracting, the central bank said on Monday.
In comparison with April, economic activity was flat on a seasonally adjusted basis.
Chile's central bank has forecast overall growth of between 2.25 and 3.25 percent this year, up from a five-year low of 1.9 percent in 2014.
But the fortunes of Chile are tied to demand in key copper buyer China, and poor performance in the Asian giant's property market has had a knock-on effect in the South American country.
Weak data and rising unemployment in Chile may prompt the central bank to downgrade its growth forecast and return to an expansive monetary policy, after halting it in October last year.
The government is expected to lower its own 2015 growth forecast for Chile later on Monday, which currently stands at 3.2 percent.
In reaction to the IMACEC data, and hit also by a sell-off in copper and global market fears following the Greece referendum, the peso opened as much as 0.9 percent weaker against the dollar.
(Reporting by Rosalba O'Brien; Editing by Bernadette Baum)
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