Chile's IMACEC economic activity index rose 0.3% in October from the previous year, the central bank said on Friday, slightly below forecasts.

Economists polled by Reuters expected a 0.4% increase.

According to the central bank, the result was explained by a slight increase in "the manufacturing and service sector, but partly offset by the decline in mining".

The annual reading marks the fourth uptick for the index this year, with previous positive measurements in January, July and September. The economy of the Andean nation has lost steam after a swift recovery from the COVID-19 pandemic, which triggered a rise in inflation and subsequent vigorous monetary restrictions.

IMACEC, a close proxy of gross domestic product, was down 0.1% when compared with the previous month, the central bank said.

Pantheon Macroeconomics economist Andres Abadia said the main drag "by far" was the mining sector, plunging 3.5% m/m, more than offsetting the 2.9% gain in September.

"Manufacturing also added to the bad news, retreating by 1.4%, partially eclipsing a 2% gain in September", Abadia adds.

The non-mining IMACEC grew by 1.0% in twelve months.

The economist also said this confirms that domestic demand is finally gathering momentum, thanks to lower inflation, and the boost of modest interest rate cuts. But Abadia contrasted it by saying "the weakness in business sentiment, increasing unemployment, and still-elevated borrowing costs, suggests the upturn will be modest and bumpy, in the very near term".

The mining industry of the world's largest copper producer has had a weak performance in recent months, largely due to the operational problems of state-owned giant Codelco.

(Reporting by Natalia Ramos, Fabian Cambero and Natalia Siniawski, editing by Christina Fincher and Toby Chopra)