Following the publication of sectoral data by the National Institute of Statistics (INE) and the dewatering unemployment figures, which is already in the national double digits resulting from the pandemic, the eyes of the analysts are set on the Imacec (Monthly Economic Activity Index) to be communicated on Wednesday by the Central Bank.
After the historic contraction of April’s 14.1% Imacec, the forecasts are even worse in the market, and there is full coincidence in that. “With this background, and waiting for what the Central Bank reports tomorrow, we estimate a drop of the Imacec of 16.8% in twelve months, a little worse than our previous estimate, but not much,” says Alejandro Fernández, Manager of Gemines Studies.
In the market they move in a similar range. Banchile Inversiones estimates that the Imacec would show an annual decline of up to -17%,” projects, while Inversiones Security goes further and notes that “the 15% drop we anticipated in the May Imacec would add a similar decline in June, leading the quarter to the worst record in more than 30 years.”
Former Economy Secretary Tomás Flores noted that the Imacec “is probably going to be between -16% and -18%,” but he aimed at deconfining. “I insist that we are seeing the past. What worries me is what requirements Chile is going to set to start de-escalation and which sector will open first,” he said at Radio Duna.
Others are more pessimistic, such as economists Alejandro Puente and Sebastián Egaña, from the CIMON center of the FACULTy of Economics and Business of the UST. “The bad news is that the quarantine was expanded to the entire Santiago Metropolitan Region in May, and to this we should add that May had two business days less than May 2019. With this, we project an annual Imacec variation of -22.6% by May, the largest annual drop for a month of which registration is recorded,” they note.
“Creepy” unemployment
For sectoral activity indicators, after falling by 5.9% in April, the Manufacturing Production Index sank by 13.3% in the fifth month of the year, hit by a decline in food processing.
On the other hand, the Mining Production Index had an increase of 2.1% EGA (Electricity, Gas and Water) 3.2% and trade 23.5%, “the latter being the positive surprise, since it could have been worse”, said Fernández.
In his view, “sectoral data is very bad, but as anticipated. If they had been worse, no one could have been surprised, what can they get worse? There’s no doubt about it! All that’s left is to hold on and hope things start to get better later”
However, the picture is compounded by the dramatic numbers of unemployment. According to Alejandro Fernández, “what is observed in the labour market is creepy”
“The unemployment rate rose to 11.2% in May, which may seem high, but not terrible. However, if the above information is added that the workforce has been reduced by almost 1.4 million people and employment by almost 1.5 million by almost March. Yes, in two months, the picture starts to look daunting. This is not a seasonal phenomenon, as, in twelve months, the figures are similar. If you calculate the unemployment rate on the potential workforce, which may be excessive, yes, but it gives a more real dimension than is happening, you reach 28.1%, against 13.6% a year ago,” he says.
