(Adds full year reading, sector breakdown)
SANTIAGO, March 20 (Reuters) - Chile's economy contracted 0.4 percent in the final quarter of 2016 compared with the preceding quarter, the central bank said on Monday, as weakness in mining and business services contributed to a worse-than-expected performance.
Compared with a year earlier, fourth-quarter growth was 0.5 percent, in line with Reuters forecasts, taking the full-year 2016 growth to 1.6 percent.
Mining in Chile, the world's top copper exporter, fell 2.9 percent in 2016, the bank said in a report, hit by company cutbacks linked to a fall in the global copper price, as well as local factors like declining ore grades and weather conditions.
A poor harvest after unseasonably heavy rains hurt the wine industry. A 1.8 percent fall in business services activity, which includes architecture and engineering, also weighed on growth, the bank said.
Growth sectors in 2016 included fruit exports, personal services and retail, it said. Though Chile's formerly red-hot consumer spending growth has cooled from prior years, it is still relatively healthy.
Propelled by household spending, domestic demand grew 1.1 percent in the year. Investment fell, at a time when an uncertain economic climate and doubts over government reforms have crimped business confidence.
Reporting by Rosalba O'Brien Editing by W Simon