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Chile economy slows slightly, but consumption, jobs firm

A labourer guides as slag is poured into a container at Dongbei Special Steel Group Co. Ltd. in Dalian, Liaoning province December 27, 2013.
A labourer guides as slag is poured into a container at Dongbei Special Steel Group Co. Ltd. in Dalian, Liaoning province December 27, 2013.

By Antonio De la Jara and Anthony Esposito

SANTIAGO (Reuters) - Chile's economy showed signs it was continuing to slow slightly in November, with manufacturing output slipping for a fourth straight month, even as consumption and the labor market remained firm.

Manufacturing production fell 1.1 percent in November from a year earlier, due in part to lower production of some steel and iron products, government data showed on Monday.

Economists polled by Reuters had expected a drop of 1.3 percent.

Retail sales grew a healthy 9.2 percent from a year earlier, government data also showed on Monday. That was slower than a 13.4 percent increase in October and 10.7 percent in November 2012.

Mining powerhouse Chile is heavily dependent on exports and domestic consumption, so manufacturing and retail sales data are closely monitored for a pulse of the economy's health.

The jobless rate for September to November inched down to 5.7 percent, as employment in agriculture, livestock, forestry, construction and real estate picked up, the government's INE statistics agency reported separately.

"The 5.7 percent unemployment rate is the lowest in nearly three decades for the September to November period," Finance Minister Felipe Larrain said on Twitter.

Analysts surveyed had expected the jobless rate to remain steady at 5.8 percent.

Monday's slew of economic data follows the central bank's decision to take a breather and hold steady the key interest rate in December, after cutting it by 25 basis points in both October and November.

"The decision to pause the cycle in December corroborates our view that (the bank's) directors would likely want to buy some time to better assess the growth-inflation outlook before delivering additional monetary accommodation," Goldman Sachs said in a note to clients.

The bank's five-person governing board was unanimous in its decision to hold the rate at 4.50 percent on December 12, though they also weighed cutting the rate, minutes of that meeting showed on Monday.

The decision to hold rates "was justified in that the slowdown of the economy had been mild and it was expected to grow steadily in the coming quarters," the minutes said.

"Plus two cuts had been made to the policy rate, which were working and would continue to gradually affect the components of demand that were the most sensitive to credit costs," the bank added.

The market largely expects the bank to stick to a wait-and-see stance in the short-term to get a stronger sense of where Chile's two-track economy is heading.

"The scenario of slowing domestic demand coupled with good growth in the natural resources sector is unchanged," said Matias Madrid, chief economist at Banco Penta. "This will likely lead the central bank to hold the rate again in January."

Meanwhile, data on Monday showed that world No. 1 copper producer Chile produced 514,889 metric tonnes of copper in November, a 7.6 percent increase from the year before, due to a recovery in a major deposit that had a troubled 2012.

Chile, which produces a third of the world's copper, is struggling with dwindling ore grades in many of its aging deposits, although new mines have helped increase output in 2013.

(Additional reporting by Alexandra Ulmer and Felipe Iturrieta; Writing by Anthony Esposito; Editing by Chizu Nomiyama and Bernadette Baum)

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