Itaú BBA - COLOMBIA – Mixed activity data in June

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COLOMBIA – Mixed activity data in June

agosto 14, 2019

A meaningful activity acceleration in 2H19 remains elusive as consumer confidence stays low, the labor market weak and global growth slows.

Activity came in mixed at the end of the second quarter, with retail sales remaining strong, while the manufacturing drag intensified. Retail sales increased 7.2% yoy (8.2% previously), above the Bloomberg market consensus of 5.5% and our 5.3% forecast, despite consumer confidence staying low. Meanwhile manufacturing contracted 1.1% yoy, the second decline in the last three months, surprising market expectations to the downside (Bloomberg market consensus: +1.8%; Itaú: 3.0%). After adjusting for seasonal and calendar effects, manufacturing improved but remained weak (flat over twelve months). Tomorrow (August 14), GDP data for the second quarter of the year will be released. We expect growth of 2.8% yoy NSA (in line with 1Q19), as the reduced construction drag is offset by weaker mining activity.

In 2Q19 manufacturing grew at the slowest pace since 1Q18. Manufacturing expanded 0.3% yoy in the quarter, down from 2.8% in 1Q19 as the food-processing drag intensified (-4.5% vs +0.5% in 1Q19). Oil refining shrunk 2.9% yoy, moderating from the 5.3% drop in 1Q19. Despite weaker annual growth rates, manufacturing did post an acceleration at the margin (to 4.0% qoq/saar from 2.6% in 1Q19). Yet, with a 1.0% MoM drop in the month of June momentum into 3Q19 is set to slow. In line with the loosening labor market, employment in the manufacturing sector shrunk in 2Q19.

A recovery of vehicle sales and robust food sales lifted retail activity to 6.5% yoy in 2Q19, up from 4.8% in 1Q19. Vehicles sales picked up to 9.1% yoy (from 1.9% in 1Q19), while food sales growth rose to 9.0%. Excluding vehicles sales, retail activity grew a milder 6.1% in the quarter (5.2% in 1Q19). Data for the month of July hint at vehicle sales remaining a growth driver at the start of 3Q19. Meanwhile, fuel sales is a key drag to retail activity, with retail growth ticking up to 7.5% once fuel sales are excluded. Excluding fuel and vehicle sales, retail dynamism at the margin remained strong with growth of a broadly stable 12.5% qoq/saar.  

We do not expect a meaningful activity acceleration during the second half of this year as consumer confidence stays low, the labor market weak and global growth slows. We therefore estimate growth of 2.6% for this year (stable from last year), leading to a further widening of the negative output gap.

Miguel Ricaurte
Carolina Monzón

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