COLOMBIA – Positive activity start to 3Q21

A still-favorable external environment, fewer mobility restrictions and expansionary macro policies will support a swift GDP recovery

Vittorio Peretti  & Carolina Monzón


Activity indicators surprised to the upside in July. Both retail sales and manufacturing increased from June to July (MoM/SA) as the economic reopening consolidates. With the low base of comparison double-digit annual gains persist. Retail sales grew 26.9% YoY in July (24.7% in June), above the Bloomberg market consensus and our call of a 23% expansion. Meanwhile, manufacturing increased 20.1% YoY (similar to the gain in June), in line with our call but above Bloomberg market consensus of 16.1%. Overall, the data is consistent with a double-digit expansion (13.3%) for the coincident activity indicator (ISE; to be released on Friday 17) and supports the start of the rate hike cycle later this month.

Core retail activity sits 8% above pre-pandemic as consumption supports the recovery. Retail activity was pulled up by fuels, vehicles sales, apparel and auto parts sales, in line with loosening mobility restrictions. Core retail sales (excluding fuels and vehicles) grew 17.1% YoY (12% in June; 3.6% drop one year ago). In the quarter ending in July, retail sales expanded 24.9%, moderating from 36.8% in 2Q20, while core retail sales advanced 14.3% (19% in 2Q21). At the margin, core retail sales gained 4.8% from June, building on the 13.7% increase in the previous month. Nevertheless, given the shock from the protests in April and May, core retail sales fell 11.7% qoq/saar.

The consolidation of the economic reopening is favoring manufacturing. The 20.1% YoY manufacturing rise in July was driven by beverage production (+2.8pp contribution), oil refining (+1.4pp contribution), paper production (+1.4pp contribution) and apparel (+1.3pp contribution). During the quarter ending in July, manufacturing increased 17.0% YoY, after expanding 28.6% in 2Q (6.3% in 1Q21). Sequentially, manufacturing was up 5.6% from June (SA), adding to the 29.2% rise recorded in June. During the quarter, manufacturing contracted 21.3% qoq/saar. Nevertheless, manufacturing levels exceed pre-pandemic levels by nearly 9%. 

We expect the Colombian economy to expand by 7.8% this year (vs. a 6.8% drop in 2020). The still-favorable external environment, fewer mobility restrictions and expansionary macro policies are likely to support a swift GDP recovery this year. For 2022, we expect growth of 2.7%.

Vittorio Peretti 
Carolina Monzón