Chile’s economic activity expanded for the first time since January as a surge in mining softened the blow from declines across other sectors, corroborating the central bank’s plans to continue interest rate cuts.

The Imacec index, a proxy for gross domestic product, rose 0.5% in June from the previous month, compared to the -0.1% median estimate in a Bloomberg survey. From a year prior, it fell 1%, the central bank reported on Tuesday.

Chile’s central bank cut rates by a full percentage point last Friday — surprising most analysts who had expected a smaller reduction — as demand slumps and inflation heads back toward target. Double-digit borrowing costs have dragged on the purchases of goods from vehicles to supermarket items. Meanwhile, measures of business and consumer confidence remain below historic levels.

Read more: Chile Delivers Jumbo Rate Cut as Latin America Pivots to Easing

Mining surged 4.5% on the month in June, bouncing back from a 3.6% decline in May, according to the central bank.

On the other hand, commerce fell 0.5% during the period, dragged down by the automobile sector. Services also dropped 0.5% on weak demand from businesses, and industry decreased 1%.

“All in all, this was a poor report, despite the decent headlines,” Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, wrote in a note. “Activity retreated by 0.6% quarter-on-quarter in Q2, reversing a similar gain in Q1.”

Swaps are now pricing a rate cut of as much as 150 basis points in September, while setting the year-end policy rate at 5.5%, compared with 7% before the bank’s decision on Friday. Borrowing costs are seen near 3.5% in 12 months.

Gross domestic product will tick up just 0.2% this year, according to Finance Ministry estimates published in July. That’s a sharp contrast from the record growth of 11.7% recorded in 2021 when government cash transfers and billions of dollars in early pension withdrawals propelled consumption.

“The level of activity continues to be below potential,” economists at Bice Inversiones wrote in a note. “We expect the central bank will continue with its cycle of interest rate cuts, lowering borrowing costs to 7.5% at the end of the year.”

--With assistance from Giovanna Serafim.

(Updates with more details from report and economist comments starting in fourth paragraph)