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COLOMBIA – Weak activity indicators in May

July 14, 2017

The continued weak activity evolution poses a downside risk to our 1.6% growth forecast for this year

May activity indicators came in below expectations and confirm activity in the second quarter of the year will continue to show weakness. In May, retail sales contracted 0.5% year over year (-2.0% in April), below the Bloomberg market consensus of +1.2% and our +1.4% forecast. Meanwhile, industrial production fell 0.6% year over year (-6.8% in April), in spite of having one additional working day, inferior to the +1.2% Bloomberg market consensus and our +2.0% forecast.

Car and motorcycle sales (+3.0% year over year), household appliances (4.5%) and food and non-alcoholic beverage sales (+2.6%) limited the overall retail sales decline (-0.5%) in the month. Meanwhile, the main drag in May came from vehicle spare part sales (-4.4% and -0.4pp contribution the overall decline). Adjusting for calendar effects, retail sales without vehicle and fuel sales moderated to +0.3% year over year, from 0.7% in April. Nevertheless, at the margin, retail sales, excluding vehicle and fuel sales, is showing some improvement, increasing 4.0% qoq/saar, but after a drop in 7.4% in 1Q17. A meaningful consumption recovery ahead is unlikely as consumer confidence has remained deeply entrenched in pessimistic territory.

The 0.6% annual fall in industrial production was led by the 8.0% drop in clothing production, while the 9.8% rise in paper manufacturing limited the decline. Having reached a high base of comparison (given the continued operations at the upgraded Cartagena refinery), oil refining is no longer meaningfully supporting industrial production. Industrial production excluding oil refining fell 0.8% (not significantly more than headline industrial production). Once adjusted for calendar effects, industrial production performed poorly in the month with a 1.1% contraction (+2.0% in April). At the margin, industrial production declined by 3.1% qoq/saar, more moderate than the 6.8% drop in 1Q17. We note that a strike in a port in Buenaventura during the month and which extended into June could partly explain the weak headline figures as imports of machinery and equipment were affected.

The continued weak activity evolution poses a downside risk to our 1.6% growth forecast for this year (2.0% in 2016).


Miguel Ricaurte

Vittorio Peretti


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