Itaú BBA - COLOMBIA – Activity surprises to the upside in May

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COLOMBIA – Activity surprises to the upside in May

julio 15, 2019

Despite firm readings in May, the economy still faces significant headwinds

Activity in May was upbeat. Retail sales increased 8.2% yoy (4.0% previously), above the Bloomberg market consensus of 5.0% and our 4.6% forecast. Once adjusted for seasonal factors, retail activity grew at a slower but still upbeat pace. Meanwhile manufacturing rose 3.2% yoy (-1.5% previously), in between our 2.4% forecast and the 4.2% Bloomberg market consensus. Despite firm readings in May, the economy still faces significant headwinds.

Manufacturing bounced back from the contraction in April, in part aided by one additional working day and a lower base of comparison. In May, chemical production (0.6 pp contribution) led the 3.2% yoy headline increase. Manufacturing grew a milder 2.6% (-0.3% in April) once adjusted for seasonal and calendar factors. In the quarter ending in May, manufacturing grew 1.6% (2.8% in 1Q19 and 2.9% in 2018), but posted an acceleration at the margin (to 8.6% qoq/saar from 2.4% in 1Q19). 

Food and vehicle sales contributed to roughly half (~4.0pp) of the retail sales gain in May (8.2% yoy), while all but one of the major categories expanded. In the quarter ending in May, retail sales expanded 5.8%, up from 4.8% in 1Q19, but still below the 6.2% in 2018. Excluding fuel and vehicle sales, retail activity increased at a broadly stable 6.5% in the quarter, and 13.6% qoq/saar.  

Low consumer confidence, a weak labor market, and our expectation of lower global growth make us believe a meaningful activity acceleration this year is unlikely. Hence, we see growth of 2.6% this year (stable from last year).


Miguel Ricaurte
Carolina Monzón



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