LIMA: Peru's annual economic growth rate slowed more than anticipated in January due to a drop in metals and oil production, government data showed on Thursday, reinforcing expectations that interest rates are on hold for now.
Year on year growth was 5.38 percent in January, down from 5.96 percent in December, a report from the INEI statistics agency said. Peru's annual growth surged 10.21 percent in January 2011.
Economists surveyed by Reuters had predicted growth of 5.5 percent for the first month of 2012.
Despite the slowdown, sequential monthly growth was 0.35 percent in January from December, INEI told Reuters.
Slower year-on-year growth means the central bank is not likely to raise the benchmark interest rate to curb above-target inflation. But the bank, which has held borrowing costs at 4.25 percent for 10 months, is not likely to cut the rate either.
"For now we don't see the central bank moving the referential rate because the economy is growing below potential, but it's not showing indicators of deceleration either," said Juan Carlos Odar, an analyst at Banco de Credito in Lima.
Compared with a year earlier, mining and energy fell 2.16 percent in January in one of the world's top metals exporters, affected by a contraction in metal and oil production.
Factory output grew a modest 1.7 percent from a year ago on slower demand from the developed world. That offset near double-digit growth in sectors linked to domestic demand like restaurants, hotels and financial services.
STRONG GROWTH EXPECTATIONS, STRONG SOL
Last week, Finance Minister Luis Miguel Castilla raised the government's official 2012 growth forecast to 5.7 percent from 5.4 percent after the US economy showed signs of recovery and concerns over the European debt crisis subsided.
A central bank official said the economy could expand nearly 6 percent this year, suggesting a potential acceleration in growth in coming months as the government increases stimulus spending in infrastructure.
Peru has been one of the fastest-growing economies in Latin America in recent years.
The country's sol currency bid flat at 2.67 per dollar after the data was released on Thursday. The sol has been trading around its strongest level in 15 years in recent months, helped by the country's strong economic fundamentals.
The national statistics agency also said the average unemployment rate in metropolitan Lima in the three months through February fell 0.8 percentage points from a year ago to 8.3 percent.
Unemployment rose 0.7 percentage points from the three months through January, however.
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