Itaú BBA - COLOMBIA – Positive activity start to 4Q19

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COLOMBIA – Positive activity start to 4Q19

Dezembro 13, 2019

Social protests may curb activity dynamism ahead

Activity in October was strong. Retail sales increased 7.4% yoy (6.9% previously), above the Bloomberg market consensus of 6.5% and our 6.0% forecast. Meanwhile, manufacturing rose 2.1% yoy (0.3% in September), above our 0.8% call and the market consensus of 1.2%. The activity progress is in line with a gradual narrowing of the negative output gap and our 3.6% growth forecast for 4Q19. However, low confidence levels and the social demonstrations registered in November put a downside risk for activity at the end of the year.

All of the retail sales categories expanded at the beginning of the quarter. Food, telecommunication equipment and home electronics contributed to roughly half (~3.5pp) of the retail sales gain in the month. In the quarter ending in October, retail sales expanded 8.1%, down from 8.4% in 3Q19, but still above the 6.5% in 2Q19. Excluding fuel and vehicle sales, retail activity increased at a broadly stable 9.6% in the quarter (9.4% in 2Q19), and 11.2% at the margin (qoq/saar), remaining steady from 3Q19.

The manufacturing increase in October was lifted by beverages and chemical production, but remained fragile at the margin. Of the 2.1% headline rise, 1.5pp came from beverage and meat production. For the rolling quarter, manufacturing grew 1.0% yoy (1.4% in 3Q19; 0.4% in 2Q19). At the margin, manufacturing growth moderated to 0.4% qoq/saar (0.8% in 3Q19), the slowest rate since February. Our diffusion index –percentage of manufacturing divisions that posted positive annual variations in the moving quarter– also showed moderation.

Robust consumption expansion will drive growth of 3.3% this year (2.6% in 2018) and 3.1% next year. Low consumer confidence, a weak labor market, and our expectation of lower global growth make us believe that domestic activity will moderate in 2020.

Miguel Ricaurte Carolina Monzón

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