Fynsa
In general, when a significant economic figure is released, we see analyses, assessments, and interpretations of the number or change, on which there are rarely conflicting views. Yes, we may see different perspectives, more or less optimistic or pessimistic interpretations, and nuances, but dissent is rare.
That is why the release of the March Imacec figures sparked so much interest for me, since the 2.1% decline compared to March 2022 led to interpretations for every taste: some news articles declared technical recessions, while the Ministry of Finance drew positive conclusions. Thus, I believe that laying out the objective data will allow us to form our own interpretation, which, as is usually the case, will likely fall somewhere in the middle.
The first point has already been mentioned. Activity showed a 2.1% year-over-year decline, a sharper drop than the market had expected (-1.7% YoY) and than we had anticipated (-1.4% YoY). I mention this because the magnitude of the surprise to the market is an important indicator regarding the data, especially when those expectations already take into account other figures for the month, analysis of news from the period, etc. The decline was primarily driven by drops in mining (accounting for nearly 50%) and trade (another 25%), which were partially offset by services.
Second, it’s always interesting to see how activity is changing over time—that is, compared to the immediately preceding period. To do this, economists use a statistical tool called “seasonal adjustment”, which, as the name suggests, allows us to remove seasonal effects that distort the comparison.
In this case, the series showed a 0.1% decline compared to February, which was also largely due to the decline in mining, followed by trade and industry. This, like the year-over-year change, was offset by the services sector. The seasonally adjusted series allows us to derive another interesting indicator: the growth rate.
This method of measuring economic activity is traditionally used in the United States when reporting annualized GDP data. If we calculate that same metric for Chile, the growth rate reached 3.9% q/q on an annualized basis; however, this figure is heavily influenced by January’s data, a situation that will no longer hold true starting next month, at which point this indicator is expected to begin declining.
In our view, the minister’s positive interpretation is based on this metric. Another interesting conclusion is that, given the 3.9% annualized quarter-over-quarter increase, the country would not be in a technical recession.
Finally, given the volatility of the mining sector, the non-mining Imacec is used to gauge the underlying economic momentum. This index fell 1.0% year-over-year, although on a seasonally adjusted basis it rose 0.2% month-over-month, marking three consecutive months of gains. As a result, the growth rate of the non-mining component reached a significant 6.4% annualized quarter-over-quarter (while that of the mining component stood at -10.5% annualized quarter-over-quarter).
What do you think? Who is right?
