COLOMBIA – Activity rebounds in June

Suspension of protests and economic reopening support the activity recovery

Vittorio Peretti & Carolina Monzón


Activity indicators rebounded in June following the suspension of protests. Manufacturing increased 29.4% from May to June, returning to activity levels of April. In annual terms, manufacturing increased 20.8% yoy, above the 16.5% rise expected by the Bloomberg market consensus and our 14.0% call (+8.6% previously). Regarding retail, core sales rose 11.5% from May, the first sequential gain since February. Total retail sales grew 24.7% yoy in June (22.6% in May), also surprising to the upside (Bloomberg market consensus: 20.6%; Itaú: 20.0%). We expect a GDP growth of 16.8% in the second quarter of 2021 (to be released next Tuesday; 1.1% in 1Q), aided by base effects and the reopening of the economy at the end of the quarter.

Retail sales grew 36.7% yoy in 2Q21, advancing from the 4.7% rise in 1Q21, but the recovery momentum slowed in the quarter given protests. The improvement in the quarter was boosted by motorcycle and vehicle sales and apparel. Meanwhile, core retail sales (excluding vehicles and fuels) grew 19.0% yoy, up from the 2.6% expansion in 1Q21 (15.3% drop in 2Q20). Despite the double-digit rise in core retail between May and June, during the quarter, it fell 20.6% qoq/saar (4.7% drop in 1Q), still reflecting the effects of mobility restrictions and the social unrest that unfolded earlier in the quarter.

Manufacturing increased 28.5% yoy in 2Q21 (+6.3% in 1Q), offsetting the 24.1% contraction one year ago. Manufacturing was driven by beverage and apparel production. At the margin, manufacturing dynamics in June more than offset the 22.2% fall registered in May with near 30% increase to end the quarter. Manufacturing levels are 3.3% above those at the start of 2020 (+3.7% in March). Nevertheless, with the interruption to activity earlier in the quarter, manufacturing in 2Q21 fell 24.0% qoq/saar (+16.5% in 1Q).

Still-favorable external momentum, significant economic reopening and expansionary policies would likely support a swift GDP recovery this year. We expect the Colombian economy to expand by 7.8% this year (vs. a 6.8% drop in 2020). The activity rebound in June, along with rising inflationary pressures support the start of a monetary policy normalization cycle at the next meeting in September.

Vittorio Peretti 
Carolina Monzón