Banco de Crédito e Inversiones (BCI) has reported significant growth in the Chilean machinery and equipment finance sector.

In its Chilean Economic Outlook report, the bank addressed the country’s second-quarter growth of 5.3%, which exceeded previous expectations of 5.2%, and credited the increase in part to a spike in the sector’s financing.

The report said: “The highlight of domestic demand was the large 7.1% year-on-year growth of gross fixed capital formation. This larger increase in investment was driven by the higher growth of machinery and equipment with this component increasing an annual 12.5%.”

It described the increase as “the greatest contribution to investment growth” during the second quarter. However, it warned that the rise may be driven by machinery replacement cycles and therefore it could be temporary, with a predicted slowdown in heavy equipment finance in the near future.

The report added: “In the opinion of the Chilean Central Bank, this increase might rather be a response to demand of replacing unreplaced machinery with the usual frequency and not to new projects and/or those with a greater scope.

“Due to this, we might see a decrease in this investment component in the next few quarters. The construction and works component grew 4.0% year-on-year, confirming the recovery quarter one 2018 and reverting seven consecutive quarters of annual contraction ending in 2017.”

Download the Chilean Economic Outlook here.