Itaú BBA - COLOMBIA – Activity improved in 2Q17, but remained weak

Macro Latam

< Back

COLOMBIA – Activity improved in 2Q17, but remained weak

August 14, 2017

The activity indicators are consistent with GDP growth of 1.4% in 2Q17, a mild improvement from the 1.1% in 1Q17

Activity in the second quarter of the year stayed low, but there was an improvement from 1Q17. In June, retail sales grew 1.0% year over year (0% in May), in line with the Bloomberg market consensus and our forecast, and 0.5% (0.4% in May) after correcting for calendar effects. Meanwhile, industrial production fell 1.9% year over year (-0.8% in May), inferior to the -1.5% Bloomberg market consensus but not as weak as our -4.5% forecast. Industrial production dropped 0.9% (-1.2% in May), after adjusting for calendar effects (one fewer working day).

Hence, in 2Q17, retail sales contracted 0.3% year-over-year, less intense than the 1.4% decline in 1Q17. Vehicle and motorcycle sales were again a principal drag in the quarter (-4.0% vs. -2.5% in 1Q17). Excluding vehicle sales, retail sales was up by 0.2% (-1.2% in 1Q17). At the margin, retail sales, excluding vehicle and fuel sales, accelerated to 0.6% qoq/saar following the drop of 7.3% in 1Q17 (when activity was negatively affected by the rise in sales tax). Lower inflation and falling interest rates will aid a consumption improvement going forward. However, a loosening labor market in urban areas and consumer confidence still languishing in pessimistic territory suggest a meaningful bounce-back is unlikely.

Industrial production dropped 3.1% year-over-year in 2Q17 (+0.3% in 1Q17). However, once calendar effects are considered, industrial production posted a null variation from 2Q16, an improvement from the -2.6% recorded in 1Q17. At the margin, industrial production increased 3.1% qoq/saar, following the 6.7% drop in 1Q17.

The performance of the activity indicators are consistent with GDP growth of 1.4% in 2Q17, a mild improvement from the 1.1% in the prior quarter. Overall, we expect mining to remain an important drag on activity in the quarter, while financial services and the sustained recovery in the agriculture sector will lift activity. For the year, we expect growth of 1.6% (vs. 2.0% growth in 2016), but acknowledge downside risks.


 

Miguel Ricaurte

Vittorio Peretti

 



< Back