Itaú BBA - Consumer confidence returns to pessimistic levels in Colombia

Latam Talking Points

< Back

Consumer confidence returns to pessimistic levels in Colombia

May 20, 2019

Despite the negative print, part of the worsening of consumer confidence could be transitory.

See our Week Ahead full note at the end of this report. 

Talk of the Day


Consumer confidence in April returned to negative territory, likely influenced by the weaker Colombian peso and protests that affected transportation routes and led to higher inflation. On that basis, part of the worsening of consumer confidence could be transitory. Think-tank Fedesarrollo’s consumer sentiment index came in at -9.6%, a significant 11 p.p. drop in twelve months (10.7 p.p. lower than in March). The return to optimism in March was the first such occurrence since August last year. The retreat from April 2018 was explained by the deterioration of both components, with the current economic index dropping from +6.1% to -6.0% and the expectation index moving deeper into pessimistic ground (from -5.4% to -14.9%). Within each factor, there was a widespread decline. On the expectations front, consumers’ view on economic conditions to the next year fell sharply (to -15% from +2.9% last year). Meanwhile, the perception on whether it is an good moment to purchase durable household goods moved from neutral levels to -11.4%. While weak sentiment is a risk to the consumption dynamism, low inflation, along with a slightly expansionary monetary policy, are expected to support confidence ahead. We expect a mild growth recovery this year to 3.1% (2.6% in 2018).


Cristina Kirchner will run for vice-presidency. During the weekend, Kirchner announced that she has asked Alberto Fernandez to lead the presidential ticket for the August primaries. She is inviting other Peronist candidates to participate in a large primary and unify the party.  For the moment, the major leaders of the Peronist party have not responded yet. The deadline for the registration of the presidential pre-candidates is June 22.

Alberto Fernandez was chief of staff under Nestor Kirchner’s presidency and continued during the first year of Cristina Kirchner’s term. Fernandez left the administration and became a fierce critic of many policies instrumented under the second term of Cristina Kirchner (capital controls, manipulation of statistics, and attacks to media and the judicial system). Surprisingly, Fernandez appeared close to Cristina Kirchner during the presentation of her book of memoirs. Kirchner’s announcement shocked the Argentine political scene as it was widely assumed that she was going to bid for a third presidential term given her rise in recent polls.


Day Ahead: At 9:30 AM, the central bank will publish GDP data for the first quarter of 2019. According to the monthly GDP proxy (Imacec), activity is set to grow at its slowest pace since 2Q17. The IMACEC series is consistent with a 0.4% gain (SA) from 4Q18 and an annual growth of 1.8% in 1Q19 (3.6% for 4Q18). At the same time, the central bank will also publish the 1Q19 current account balance. Overall, we expect the current account deficit to be USD 1.7 billion, larger than the USD 0.3 billion deficit recorded one year before.


Macro Scenario: Following the latest growth forecast revision in Brazil, we lowered our GDP growth forecast to 3% (from 3.5% in our previous scenario). The drought affected the soybean crop as well as economic activity. On monetary policy, the central bank kept the monetary policy rate unchanged at 4.75%. Looking forward, we do not expect changes in the monetary stance for the remainder of this year or the next. Regarding the inflation, our YE19 forecast stands at 4%, in line with the BCP’s target.
** Full story


Macro Scenario: Available indicators for 1Q19 suggest a renewed moderation of activity, after remaining stagnant for three consecutive quarters. We revised our YE19 growth forecast down to 0.7%, from 1% in our previous scenario. Our YE19 inflation forecast stands at 7.5%, with upside risks due to the real depreciation of the UYU early in the year.
** Full story

The Week Ahead in LatAm


The INDEC will publish the EMAE (official monthly GDP proxy) for March on Wednesday. According to leading and coincident indicators, economic activity dropped on a sequential basis in February. Official indicators for industrial output and construction activity showed month-over-month losses (SA) of 4.3% and 3.5%, respectively. The monthly GDP proxy published by OJF consulting firm (IGA index) fell 0.7% mom/sa in the same period. We forecast a 0.7% drop against February 2019, implying a 5.8% year-over-year drop.

The trade balance for April will come out on Thursday. A weak currency and contracting internal demand are leading to trade surpluses. We forecast a surplus of USD 900 million in March (versus a USD 1300 million deficit registered in the same month of 2018). 


May’s IPCA-15 inflation will be released on Friday. We forecast a 0.38% monthly increase, leading the 12-month reading to 4.96% (from 4.71% in April). Vehicle fuels will likely post the major upward contribution to the current monthly reading, while we expect food items to post a slightly negative reading (-0.05%) this month, after pressuring inflation during this year’s first quarter.

On economic activity, April’s CAGED formal job creation will probably be released this week (date not yet specified), for which we forecast a net creation of 79k jobs. Adjusting for seasonality, our forecast implies 15k formal jobs creation, leaving the 3-month s.a. moving average stable at 14k. This is a weak pace of job creation, and the current level of business confidence does not point to an acceleration in the coming months. FGV’s confidence indexes for May on the industrial (preview), consumer and retail sectors will also be released throughout the week.

On the fiscal front, April’s tax collection may come in during the week, for which we expect a BRL 139 bln print.

Finally, the market will remain focused on the news flow about the pension reform in the special committee. Throughout the week, some major provisional measures may be voted in the Lower House (MP 868, 870 and 871), which can be indicative of the current situation of the government’s articulation with the Congress, with key implications for the pension reform’s outlook.


On Monday, the central bank will publish GDP data for the first quarter of 2019. According to the monthly GDP proxy (Imacec), activity is set to grow at its slowest pace since 2Q17. Primary sectors (led by mining) would be a key drag on activity (affected by supply shocks), slowing imports of capital goods and weaker credit reports hint at a moderation of investment momentum, while depressed sentiment and low retail sales point a consumption deceleration. The IMACEC series is consistent with a 0.4% gain (SA) from 4Q18 and an annual growth of 1.8% in 1Q19 (3.6% for 4Q18).

Also on Monday, the central bank will publish the 1Q19 current account balance. A widespread moderation of imports amid broadly stable but weak exports led to some improvement in the trade balance in 1Q19 versus the close of 2018 (USD 1.9 billion surplus vs. USD 0.3 billion in 4Q18), but still far below the USD 3.0 billion surplus recorded in 1Q18. Meanwhile, the income deficit is likely to remain elevated as copper prices rose in the quarter. Overall, we expect the current account deficit to be USD 1.7 billion, larger than the USD 0.3 billion deficit recorded one year before. 


Think-tank Fedesarrollo will publish industrial and retail confidence for the month of April on Wednesday. In the previous month, both indicators remained in optimistic ground, posting gains over the twelve-month period. Industrial confidence was 3.0% in March (0 = neutral), up from 0.2% one year earlier (5.1% in February), registering an improvement in the expectations for production in the upcoming quarter. Meanwhile, retail confidence came in at 27.5% (24.6% in March 2018; 31.8% in February), with the annual gain evenly explained by the three sub-indexes: a reduction in inventory levels, better expectations of the economic situation in the coming semester and the evaluation of the current situation. 


On Wednesday, the statistics institute (INEGI) will announce March’s retail sales. We estimate that retail sales grew 2.3% year-over-year, from 1.8% in February. Private consumption indicators have shown a moderation in the growth rate, consistent with the recent weakness in the labor market. However, the recent real wage increases are a buffer for activity, sustaining the real wage bill and smoothing the consumption slowdown. 

On Thursday, INEGI will publish CPI inflation figures for the first half of May. We expect bi-weekly CPI to fall by 0.30% (from -0.29% a year ago), pulled down by a sharp decline in electricity prices due to seasonal “summer” subsidies to electricity tariffs. Regular gasoline prices are also expected to exert downward pressure to the CPI. Assuming our forecast is correct, headline CPI would print 4.43% year-over-year (from 4.44% in the second half of April).

Ending the week, the national statistics institute (INEGI) will publish Q1’s GDP growth, which we expect to post 1.1% year-over-year (from 1.7% in 4Q18), slightly below the flash estimate announced last week by INEGI. We expect a weak industrial production sector, dragged by a fall in oil output and a deceleration in the manufacturing sector. Moreover, the construction sector is also expected to weaken due to engineering works, which is associated to a deceleration in public fixed capital expenditure. In turn, we expect the services sector moderated its growth pace.

Together with the quarterly data, INEGI will publish March’s monthly GDP proxy (IGAE), which we expect to grow 0.8% year-over-year (from 1.1% in February). This forecast is consistent with our estimate of 1Q19 GDP growth. 

The Central Bank will publish Q1’s current account balance also on Friday. We expect the current account deficit to remain narrow. Although lower oil production and the deceleration of the U.S. economy will exert downward pressure on Mexico’s exports, internal demand is weakening (largely reflecting the effect of uncertainty over domestic policies and trade relations with the US on investment).

On the same day, INEGI will announce April’s trade balance. We expect manufacturing exports slowed down, reflecting weaker external demand. In turn, we expect non-oil imports also deteriorated, reflecting some deceleration of internal demand. 


On Tuesday, the statistics institute (INEI) will announce GDP growth for 1Q19. In line, with the first three months of the GDP monthly proxy, we estimate 2.3% growth in 1Q19 (from 4.8% in 4Q18). The demand-side breakdown of GDP will likely show a weaker gross fixed public investment (associated to a deceleration in public investment expenditure execution in the 1Q19). Private consumption likely moderated its pace, considering the softness in the labor market in the 1Q19. On the external side, we expect exports weakened in 1Q19 (mainly metallic exports, associated to softness in mining output), while imports decelerated mildly.

< Back