Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
March 1, 2025 –
“The Chilean Peso remained under pressure against the dollar, set to end the week lower as investors assessed a combination of mixed domestic and external economic data. In the US, PCE figures reported a 0.3% increase, aligning with expectations. Personal income rose sharply by 0.9%, beating forecasts of 0.3%, which could suggest inflationary risks and reinforce the Fed’s hawkish narrative. Conversely, personal spending declined by 0.2%, following recent weak consumer confidence figures. This divergence could provide some relief on inflation but creates uncertainty for the Peso, as investors remain cautious.
Domestically, January’s industrial production (IPI) grew by 1.9% year-on-year, driven by the robust performance of manufacturing, mining and the electricity, gas and water sector. However, the monthly seasonally adjusted series revealed a sharp 3.1% decline, hinting at short-term volatility. Manufacturing production expanded 3.5% due to gains in food product manufacturing, machinery and equipment manufacturing and wood production, suggesting a growing economy. However, the manufacturing of metal products experienced a 15.4% contraction, reflecting a slowdown in the construction sector.
Mining, a key sector of the Chilean economy, posted a modest 0.6% annual increase. Yet, on a seasonally adjusted monthly basis, mining activity plummeted by 6.9%. Metal mining fell by 0.9% due to reduced processing and lower copper extraction. Given copper’s primary driver of the Chilean economy, its decline could weigh on the economy and pressure the Peso further.
Meanwhile, retail sales surged by 8.0% year-on-year, boosted by robust performance in retail trade and the automotive sector. The Indice de Activida del Comercio (IAC) at constant prices advanced by 5.6%, signaling a positive outlook for economic growth. Furthermore, moderate gains were recorded in wholesale trade, suggesting a high propensity to consume and potentially boost economic growth.
In the labor market, the unemployment rate from November 2024 to January 2025 declined to 8.0%, down 0.4 percentage points from the same period last year. The health, public administration and transport sectors contributed the most to this improvement. However, the expansion of state-driven employment could increase public spending, potentially straining fiscal sustainability.
Looking forward, investors’ attention shifts to Monday’s IMACEC Economic Activity indicator. Strong economic performance should benefit the Chilean peso, while signs of economic slowdown might prompt investors to reduce exposure to Chilean assets.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone