Itaú BBA - COLOMBIA – Another strong year for retail, but can it endure?

Macro Latam

< Voltar

COLOMBIA – Another strong year for retail, but can it endure?

Fevereiro 13, 2020

Despite protests losing momentum by December, activity at the margin continued to weaken, hampering the carry-over for 2020

Activity growth in the final month of 2019 expectedly improved from the protest-hit month of November, but risks persist. Retail sales increased 7.1% yoy (4.4% previously), above the Bloomberg market consensus of 5.5% and close to our 7.3% forecast, as business operations normalized following the protests of November. Meanwhile, the manufacturing rebound, aided by a low base of comparison and a favorable calendar effect, underwhelmed with growth of 3.2% yoy (-1.5% previously; Bloomberg consensus: 3.7%; Itaú: 4.5%). As a result, we expect GDP growth of 3.3% in the final quarter of 2019, similar to the 3Q19 performance. Overall, consumption-related activity, supported by credit, drove growth last year, while manufacturing failed to capitalize on a weaker COP (partly due to a softer global demand). Despite protests losing momentum by December, activity at the margin continued to weaken, hampering the carry-over for 2020.

Manufacturing slowed to 1.5% yoy last year, from 2.9% in 2018, as oil refining shrunk 2.3% (+4.0% in 2018). In the final quarter of last year, industrial production increased 1.1% yoy, down from 1.5% in 3Q19. At the margin, manufacturing fell 3.4% qoq/saar (+0.7% in 3Q17 and +4.0% in 2Q19). An uncertain global outlook poses a threat to manufacturing dynamism ahead.

Although consumer confidence remains low, healthy credit growth and some positive signs from the labor market mean the consumption pull could persist this year. In 4Q19, retail sales growth moderated to 6.3% year over year, down from the 8.3% growth in 3Q19, but core sales (excluding fuels and vehicles) continued to grow at a steady pace of 9.1%, boosted by food and home electronics sales. Retail activity grew 6.5% in 2019 (6.2% one year earlier). However, retail sales (excluding fuel and vehicle sales) at the margin are not too encouraging, as they expanded 1.3% qoq/saar (11.3% in 3Q19), the slowest pace since 4Q17.

Overall, we expect robust investment and consumption to drive a GDP growth rate of 3.1% this year (compared with the 3.3% estimated for 2019 and 2.6% in 2018). The main risks are associated with the global outlook, but domestic uncertainty (coming from social unrest and delayed fiscal consolidation) will play a role too. Positively, protests in Colombia have so far been not as disruptive or persistent as in other countries in the region.
 

Miguel Ricaurte Carolina Monzón



< Voltar