August 18, 2017 / 12:52 PM / a year ago

UPDATE 1-Chilean economic growth boosted by domestic spending

(Rewrites throughout, adds domestic spending, context)

SANTIAGO, Aug 18 (Reuters) - Chile’s gross domestic product grew broadly in line with expectations in the second quarter of 2017, boosted by domestic spending, the central bank said on Friday, although investment continued to lag.

GDP grew by 0.7 percent in the second quarter from the first quarter in seasonally adjusted terms.

On an annual basis, second-quarter growth was 0.9 percent, in line with a Reuters forecast of a 0.95 percent expansion.

Mining in the top copper exporter recovered from the first quarter but was still down 3 percent from a year ago, as output at Escondida, the world’s biggest copper mine, slowly recovered after a six-week strike in February and March.

Domestic spending grew a healthy 3.9 percent from last year, helped by both household and government spending. The central bank highlighted dynamism in spending on goods such as cars and personal technology. Government spending was in line with the budget, it added.

Despite an economic slowdown in recent years linked to weak copper prices, the center-left government of President Michelle Bachelet has raised taxes since it took power in 2014. It has boosted spending on education and social provision to tackle deep inequality in the South American country.

The price of copper, by far Chile’s most important export, has gradually risen this year. It hit its highest level since late 2014 as expectations mount of strong demand and tighter supply, and previously moribund investment in the Chilean mining sector has begun to show some signs of revival.

However, investment in the second quarter still contracted from a year ago.

“The national accounts continue to show signs of significant weakness,” said economists at BCI, pointing to falls in both investment and exports. It forecast 2017 growth of 1.4 percent, as a mild recovery accelerates in the second half of the year.

Reporting by Rosalba O'Brien; Editing by Chizu Nomiyama

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