MercoPress. South Atlantic News Agency

Chilean economy slows down as the mining sector contracts 6.5% in third quarter

Unusual rain and labour unrest disrupted mining in the world’s leading copper producer

Chile's economy grew a seasonally adjusted 0.6% in the third quarter from the second quarter of 2011, slowing from a downwardly revised 1.3% in the previous quarter.

GDP expanded 4.8% in the third quarter from the same period a year ago, moderating growth from a downwardly revised 6.6% in the second quarter versus a year earlier.

”GDP (this quarter) was boosted by all economic sectors, save mining, which showed a contraction” the central bank said in a statement.

The mining sector clocked a 6.5% fall in the third quarter versus a year earlier, accelerating the fall from a 1.9% drop in the second quarter of this year.

In the third quarter, the mining sector was hit by sporadic and highly unusually rain in Chile's copper-rich Atacama, the world's driest desert.

Labour unrest including a two-week strike in the world's top copper mine Escondida, also disrupted mining in Chile, which accounts for about one-third of global copper output.

Without providing details, the central bank said the fall in mining production was due to the copper sector, which is also battling declining ore grades.

Helping offset the mining slump was the fisheries sector in Chile, a leading salmon exporter. The fisheries' sector output zoomed up 59.4% in the third quarter versus a year earlier as it recovers from a devastating virus on fish farms and a low base of comparison.

The commerce, restaurant and hotel sector grew 6.4% over a year earlier, led by retail sales.

Domestic demand was firm in the third quarter, jumping 9.4% from a year ago, bank data showed, buoyed by investment in machinery and equipment as well as domestic consumption.

The central bank put 9-month accumulated GDP growth at 7%, slightly above the government's forecast for 6.5% expansion this year.

However Chile's economic growth is seen easing on the back of world financial instability, softer domestic demand and the effects of an aggressive cycle of rate hikes in the second half of last year and the first half of this year.

But the bank last week held its key interest rate steady for a fifth consecutive month, and markets are betting it will delay an eventual cut after inflation spiked and economic growth picked up in September.

Chile's current account registered a 2.895 billion dollars deficit in the third quarter, a sharp retreat from the upwardly revised 256 million dollars surplus posted in the second quarter of the year.