Itaú BBA - Colombia: Weak labor market in November

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Colombia: Weak labor market in November

December 28, 2018

Weak labor market in November, faltering business and consumer confidence and lower oil prices pose risks to the activity recovery

Talk of the Day


The national unemployment rate came in at 8.8% (8.4% one year ago) in November, with urban unemployment rising 0.2pp to 9.8% (close to both the Bloomberg market consensus and our 9.7% forecast). In the quarter ending in November, the national unemployment rate picked up to 9.1%, 0.4pp higher than one year ago, while the urban unemployment came in at 10.2%, 0.3pp above the corresponding 2017 quarter. A falling participation rate (to 66% from 67% one year ago) in urban areas is also limiting the increase in the unemployment rate. At the margin, once adjusted for seasonal factors, the national unemployment increased to 9.9% in the quarter ending in November from 9.5% in 3Q18.

A weak labor market, faltering business and consumer confidence and lower oil prices pose a risk to the activity recovery. Hence, with inflation near the 3% target we expect the central bank to remain on hold for the time being. Our expected activity recovery to 3.3% for 2019, from 2.6% in 2018, in part depends on an improvement in labor dynamics. The activity rebound would also be aided by low interest rates, higher real wages (given lower inflation) and consolidating external demand. Full story here

Day ahead: The central bank will publish the minutes of December’s monetary policy meeting at 4:00 PM (SPT). 


The Brazilian Central Bank released yesterday the credit figures for November. In real terms, the daily average of new non-earmarked loans climbed 2.4% mom/sa. In the earmarked segment, new loans increased 1.5%. Overall seasonally-adjusted delinquency was virtually flat at 3.0%. The average interest rate was unchanged from October. The performance of the daily average of new non-earmarked loans was defined by a 4.9% hike in loans for households which offsets a 0.9% drop in loans for non-financial corporations, adjusted for inflation and seasonality. In the earmarked segment, new loans soared 18.3% for non-financial corporations and declined 7.2% for households. Full story here.

The central government posted a BRL 16.2 billion primary deficit in November, in line with our call and market consensus (at BRL -16.2 and -15.6 bln, respectively). The result came pretty much in line with our expectation and benefited from 7 BRL bln related to oil fields auctions.

Central government result will likely be around BRL 30 bln (0.5% of GDP) better than the target for the year (BRL 159 billion or 2.3% of GDP). Even with a more moderate economic growth and the adoption of subsidies for diesel prices, lower than currently estimated expenditures and some resilience in recurring revenues eased any pressure to comply with the target.

Day ahead: November’s national unemployment rate will be released at 9:00 AM. We forecast a decrease of 0.1 p.p, to 11.6% (stable in seasonally adjusted terms). On fiscal accounts relative to November, we expect the consolidated public sector to post a BRL 18.2 bn primary deficit at 10:30 AM. In addition, December’s FGV business confidence survey on services and the economic uncertainty indicator were scheduled to be released at 8:00 AM, but, up to the moment of this publication, were not available.


Current account figures came in worse than expected in the third quarter of 2018. The current account registered a 7.5 USD bln deficit, below our call (-6.0 USD bln) and market expectations (-5.7 USD bln). This is a slightly better outlook in comparison with the previous month, which posted a 8.3 USD bln deficit.

Activity decline in October was worse than expected. The EMAE (official monthly GDP proxy) came in with a drop of 4.0% yoy, below market expectations of -3.7% (as per Bloomberg). The drop represented a slightly better outlook in comparison with the previous month outlook, which was posting a -5.8% yoy drop.


Day ahead: INEGI will announce November’s trade balance at 12:00 PM. We expect US economic activity continued supporting manufacturing exports. However, this support is expected to fade away as the US economy decelerates. Moreover, a decreasing trend in oil output is a downside risk to the energy balance.


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