Chile is rapidly outpacing the earthquake of February 27 and the global financial crisis as the economy grows at a healthy pace. So naturally trading for dummies investing buffs tend to keep an eye on anyplace with this much growth.
The Monthly Economic Activity Index, or Imacec, registered a growth of 7.1% in May, said Monday the central bank.
May's growth was well above the 5.6%% growth anticipated by analysts according to the median estimate of eight economists polled by Dow Jones Newswires. Estimates ranged from gains in a range from 4.8% to 6.1%.
The Imacec adjusted for seasonal factors rose by 1.4% from the previous month, while the cyclically adjusted index grew 5.6% year on year, said the monetary authority.
The Imacec is considered an approximation of gross domestic product because it comprises 90% of GDP components.
May's growth was driven by "the dynamism of trade, retail and wholesale, transport and communications activity and the electricity sector, gas and water, and industrial sector growth," the statement said the central bank. In other words the stock trading for dummies strategy suggest Chile is a developing country with plenty of ground floor trading opportunities.
The monetary authority said in May 2010 had one working day more than the same month last year.
By 2010, the central bank forecasts GDP growth of 4% to 5%, according to its recently revised outlook, driven in part by the reconstruction efforts of the third and fourth quarters.
In the first quarter, GDP grew by 1% year on year, despite the devastating earthquake that affected economic activity in March.
Following publication of the May Imacec, which was unexpectedly high, analysts now expect that GDP will expand by around 6% during the second quarter thanks to strong demand.
"As we have noted on previous occasions, the main driver [for growth] would be domestic demand," said Rodrigo Aravena in a note, principal analyst at Banchile Investments.
As a result of strong GDP growth, the central bank is likely to continue raising the benchmark interest rate this month, analysts said.
In June, the bank raised the interest rate for the first time in nearly two years at 1%, from a low of 0.5%, which lasted from July 2009.
"These numbers [of Imacec] confirm the strength of economic recovery in post-earthquake and continue to impose pressure on the Central Bank for the next policy meeting, where we consider guaranteed 50 basis point hike," said local brokerage BCI Broker in a report to clients.
Analysts estimate that by the end of the year, the benchmark rate will probably reach 3.0% -3.5%, which, according to central bank continues to be an important incentive.
The bank will conduct its next policy meeting on 15 July.
