The fourth-quarter figure was slightly higher than estimated in the previous Monetary Policy Report and expected by the market, largely due to the greater contribution of mining. In the last six quarters, the expansion of sectors other than natural resources, that better reflect changes in the use of installed capacity, has continued showing relatively stable rates, around 5.5%, not far above the trend. Domestic demand growth, in contrast, has picked up again. After falling steadily during 2011 and approaching GDP growth rates in early 2012, it rose again in the following quarters, to end the year with a y-o-y expansion that outperformed GDP by 1.5 percentage points. This reacceleration reflects stronger investment and, most recently, also stronger private consumption. On the investment front, the strong momentum of mining and energy projects has persisted, while imports of capital goods have continued to reflect the strong increase in the purchases of transport equipment. Moreover, in the real estate industry, sales have remained strong, particularly for housing in construction stage, and other indicators such as dispatches, sales and imports of materials for this sector have remained high despite some marginal slowdown. The expansion of consumption has found support in rising personal income, which reflects the evolution of employment and real wages. In the fourth quarter of 2012 consumption grew 7.3% in real terms, owing primarily to durable goods. Partial data from the first quarter of this year, such as retail, household items and car sales, signals dynamic private consumption. Domestic financial conditions show no major changes in recent months.

In early 2014, both headline and core CPI inflation should hit 3% and stay there until the end of the projection horizon, this time the first quarter of 2015 (figure 4). This projection assumes that wages will adjust in line with productivity and the inflation target. This forecast also uses as a methodological assumption that in the projection horizon, the real exchange rate (RER) will remain around its recent values. This, because with the nominal exchange rate and currency parities currently in effect, the RER is estimated to be within – although in the lower part of – the range consistent with its long-term fundamentals. Finally, the baseline scenario uses as a working assumption that the MPR trajectory will be similar to what can be inferred from the latest surveys available at the statistical closing of this Report (figure 5). In the past few quarters, the Chilean peso has appreciated both bilaterally against the dollar and in multilateral terms (figure 6). This gain in value has also resulted in an appreciation of the RER. The factors behind this trend are varied, but in essence have to do with the cyclical position of the Chilean economy relative to other countries, especially the developed world, and the weight of commodities in its export basket. However, as we note in a box in this Report, if these factors are taken into account, the appreciation of the Chilean RER is not different from that of other emerging economies, other commodity-exporting countries and other economies with closed output gaps (figure 7).