August 18, 2016 / 1:12 PM / 2 years ago

UPDATE 1-Chile economy shrinks in second quarter from first as mining falls

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SANTIAGO, Aug 18 (Reuters) - Chile’s gross domestic product shrunk by 0.4 percent in the second quarter of 2016 from the first quarter, as mining in the world’s biggest copper exporter contracted, the central bank said on Thursday.

The fall was the first contraction from one quarter to the next since early 2010, when Chile was hit by a devastating earthquake. The setback followed higher-than-expected 1.3 percent growth in the first quarter.

Cooling demand in China and new supply have weighed on the copper price, dragging investment in Chile downwards and leading companies to cut jobs and output.

Copper mining contracted 6.0 percent in the April to June quarter, the bank said, as lower ore grades in Chile’s mines and unfavorable weather also took their toll.

However, domestic consumption and government spending have helped outweigh the mining slide, and the economy is still growing in annual terms. Compared with a year earlier, second-quarter growth was 1.5 percent.

That topped the 1.1 percent expansion forecast in a Reuters poll but was below a revised 2.2 percent expansion in the prior quarter.

The bank also revised 2015 growth to 2.3 percent from 2.1 percent previously, due to the inclusion of electronic tax receipts. It has forecast growth of between 1.25 and 2.0 percent this year.

Reporting by Rosalba O'Brien and Antonio de la Jara Editing by W Simon

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