Itaú BBA - COLOMBIA – Retail sales drive economic recovery in 3Q20 

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COLOMBIA – Retail sales drive economic recovery in 3Q20 

November 13, 2020

The reopening of the economy, improving private sentiment and significant monetary stimulus would sustain the recovery process

Activity indicators continued to shrink on an annual basis in September, but gains at the margin support a gradual recovery process. With the mandatory quarantine lifted in September, both retail sales and manufacturing posted the mildest annual activity declines since the onset of the pandemic. Retail sales fell 0.8% yoy in September, an upside surprise to both the Bloomberg market consensus of -9.3% and our call of a 8.0% drop. The result was far more benign than the 17.1% drop recorded in the prior month and the 43% decline at the worst of the crisis in April. Fuels, apparel, and vehicle sales dragged activity in the month (together subtracting 2.4pp from the headline result), while telecommunications equipment, electronic devices, and cleaning product sales limited the decline. Meanwhile, manufacturing contracted 3.0% yoy, milder than the 4% drop expected by us (also the Bloomberg market consensus) and moderating from the 10.3% fall in August (35.8% peak in April). Manufacturing in the month was boosted by pharmaceutical goods, non-metallic minerals (related to construction) and animal food (together contributing 0.6pp to the headline result). Overall, we expect a GDP contraction of 8.5% in 3Q20 (to be released on November 17), partially recovering from the unprecedented 15.7% contraction in 2Q20.

Core retail sales returned to pre-pandemic levels in September. Retail sales contracted 10.2% yoy in 3Q20, a significant improvement from the 27.8% fall in 2Q20, as mobility restrictions were eased at the start of the quarter and fully lifted by the close of the period, while sales incentives such as VAT-free days also played a role. Core retail sales (excluding vehicles and fuels) contracted a far milder 3.7% yoy, moderating from the 15.2% drop in 2Q20 (7.3% increase in 1Q20). While the retail sales recovery stalled at the margin in August, momentum returned in September with a 14.7% MoM gain for core activity. For the quarter, core retail sales increased 82.2% qoq/saar, bouncing back from the 53.9% drop in 2Q20. Going forward, the reopened economy, along with signs of job recoveries underway, favor retail sales advancing further in 4Q20.

Manufacturing shrunk 7.3% yoy in 3Q20, moderating the decline from the 24.0% fall in 2Q20. At the margin, manufacturing grew for the fifth consecutive month, resulting in a quarterly increase of 110.3% qoq/saar (62.0% drop in 2Q20). Nevertheless, manufacturing is still around 7% below pre-pandemic levels.



After the significant shock to the economy, the full reopening of the economy from September, improving private sentiment, along with significant monetary stimulus would sustain the recovery process. For 2021, we see GDP growth of 4.7%. 

Miguel Ricaurte
Carolina Monzón



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