Itaú BBA - COLOMBIA – Retail sales continued to drive growth in January

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COLOMBIA – Retail sales continued to drive growth in January

Março 13, 2020

Strong external headwinds will likely lead to a growth slowdown ahead

Activity indicators for January retained similar dynamics to recent months, with robust consumption leading growth, while manufacturing surprised to the upside. Retail sales grew 7.5% yoy in January (7.1% in December), broadly in line with the 7.6% of the Bloomberg market consensus and our 7.8% call. Meanwhile, manufacturing increased 3.7% yoy (3.2% in December), above our 1.2% call and the 1.5% market consensus. Low inflation, robust credit growth and persistent immigration flows have supported retail activity, despite low confidence, while recovering manufacturing is responding to solid domestic demand. Nevertheless, at the margin, retail sales fell, while manufacturing momentum is low that, along with the more adverse external scenario, hints at an activity slowdow n ahead.

Manufacturing in January was once more lifted by beverage production, while chemical production was a key drag. Beverage production lifted activity (+5.3% yoy and 0.7pp contribution), along with robust oil refining industry (+8.0%, contributing 0.6pp). Meanwhile, the chemical production decline (-10.4% yoy, contributing -0.4pp) contained manufacturing at the start of the year. For the rolling quarter, manufacturing grew 1.7% yoy, up from 1.2% in 4Q19 (1.5% in 3Q19). At the margin, manufacturing accelerated to 0.6% qoq/saar, still low but an improvement from the 1.0% drop in 4Q19 and 2.3% fall in 3Q19.

Retail activity in January reflected widespread gains. Food sales grew 6.2% yoy, contributing 1.3pps to the 7.5% headline gain, a development that follows the moderation of food prices after a transportation supply shock last year. In the quarter ending in January, retail sales growth was 6.3%, in line with 4Q19, but down from the 8.3% registered in 3Q19. Core retail activity growth (excluding fuels and vehicle sales) edged down to a still-strong 8.4% from 9.1% in 4Q19 and 9.4% in 3Q19. At the margin, core retail sales contracted 1.4% qoq/saar (+2.1% in 4Q19), the first decline since early 2017.

Looking ahead, strong external headwinds will likely lead to a growth slowdown from the 3.3% recorded last year. With the COP reaching historical highs and still wide twin deficits present, the Colombian central bank has little room to follow other authorities and increase the monetary stimulus.


Miguel Ricaurte
Carolina Monzón


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