Chile Jan. economic activity falls 0.1% y/y; est. +1.0%

Chile Jan. economic activity falls 0.1% y/y; est. +1.0%

Chile’s January Economic Activity Falls 0.1% Year/Year, Below Estimate of +1.0%

Chile’s economic activity in January 2026 contracted 0.1% year-over-year, missing expectations of 1.0% growth, according to preliminary data from the Imacec index, a key GDP proxy. The decline reflects weaker-than-anticipated performance across key sectors, including manufacturing and mining, despite modest gains in retail sales.

Industrial production fell 1.6% annually, driven by a 3.8% drop in manufacturing output, with machinery and equipment production declining 15.9% and chemical products falling 8.5%. Mining activity, a cornerstone of Chile’s economy, decreased 0.1% year/year, with a seasonally adjusted monthly contraction of 1.6% due to production stoppages and wage negotiations in the sector.

Retail sales, however, showed resilience, rising 3.7% annually, led by growth in food, clothing, and miscellaneous consumer goods. Sequentially, real retail sales dipped 0.2% month-over-month, reversing a slight gain in December.

The January slowdown follows a broader soft patch in macroeconomic data, including weaker credit growth and labor market indicators. This contrasts with upward revisions to Chile’s 2025 growth forecasts, which now range between 1.75% and 2.75%. Analysts note that achieving the projected 2.6% GDP growth for 2026 will require a significant acceleration in coming quarters.

The central bank's recent decision to hold interest rates at 5% underscores its cautious approach amid mixed signals. While disinflationary pressures, including a strong peso and falling energy prices, support further rate cuts, risks from global trade tensions and domestic political uncertainty ahead of November’s presidential election remain.

With the February 25 nationwide blackout likely to weigh on February’s data, the path to sustained recovery remains uncertain. Upcoming releases of the January Imacec and revised 2025 GDP figures on March 18 will provide further clarity on Chile’s economic trajectory.