September 5, 2016 / 12:41 PM / in 2 years

UPDATE 1-Chile economy disappoints, with lowest growth in 2 years

(Recasts, adds detail on forecasts, comments, context)

SANTIAGO, Sept 5 (Reuters) - Chile’s economic activity rose 0.5 percent in July from the same month a year earlier, below even the most pessimistic forecasts, as growth in services and retail was weighed down by declines in manufacturing and mining.

The IMACEC economic activity index, encompassing about 90 percent of the economy tallied in gross domestic product figures, was also affected by calendar factors and was the weakest performance since August 2014.

Economists had estimated a median 1.2 percent expansion in a Reuters forecast, with a range of between 0.7 and 1.7 percent.

In comparison with June, economic activity increased a seasonally adjusted 0.1 pct, the central bank said on Monday.

Cooling demand for copper in China has driven down global prices and hurt the economy of Chile, the world’s biggest producer of the metal.

“The real business cycle forward momentum weakened visibly during the second quarter of 2016, undermined by less stimulative monetary and fiscal policies, subdued consumer and business confidence, soft external demand, and a deteriorating labor market,” said Alberto Ramos at Goldman Sachs.

The central bank is widely expected to stay neutral on the benchmark interest rate after a period of a bias towards hikes, in response to the continually weak economic data and cooling inflation.

The bank has estimated that Chile’s economy will grow between 1.25 and 2.0 percent this year, and the accumulated seven-month IMACEC of 1.7 percent keeps it within that range. (Reporting by Rosalba O’Brien and Antonio de la Jara; Editing by James Dalgleish)

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