Colombia—Industrial Production and Retail Sales Plunged in November

Colombia—Industrial Production and Retail Sales Plunged in November

DANE reported that industrial production contracted by 13.3% y/y (7.1% y/y in Nov 08 and -6.7% y/y 3MMA) and real retail sales declined by 2.9% y/y (9% y/y in Nov 08 and -0.6% y/y 3MMA).  Both readings were well below expectations: industrial production (BD -8.8% y/y; Bloomberg consensus -8.1% y/y) and real retail sales (BD -2.6% y/y; Bloomberg consensus -1.5% y/y).  This result brings industrial production to a decline of 3% YTD (10.9% YTD in 11M07), and real retail sales to a rapid deceleration of 1.9% YTD (11% YTD in 11M07).

In terms of industrial production, intermediate goods output (40% of the index) contracted by -9.6% y/y, and consumer goods (41.3% of the index) declined at a more pronounced pace of 12.6% y/y.  Moreover, capital goods plunged by 29.2% y/y and construction-related goods fell by 9% y/y.  Overall, thirty-six out of forty-eight industrial categories declined, especially auto production (-33% y/y).  Finally, manufacturing employment dropped rapidly by 4.1% y/y and industrial sales declined by 14.8% y/y.image001_34.gif

This is further evidence that economic activity in Colombia continued decelerating rapidly in the 4Q08 as a consequence of unfriendly external conditions and the ongoing domestic deceleration.  That is, limited external demand, especially from the US, Venezuela and Ecuador, along with lower disposable income, tighter credit conditions and waning consumer and business confidence, all which are taking their toll on overall growth.  Moving forward, given the grim global growth and financial outlooks, coupled with low commodity prices, the Colombian economy will likely experience a rapid deceleration during the 4Q08 (2% to 2.5% y/y) and in the upcoming quarters, thus, bringing GDP growth to about 3% to 3.5% in 2008 and 1% to 1.5% y/y in 2009.


In this context, and considering that inflation and inflation expectations will most likely improve moving forward, though so far slowly, the central bank will likely be induced to cut the ON lending rate by another 50bps to 9% during the January 31st monetary policy meeting and to 7% by June 09.  Further easing in the 2H09 is probable if external and domestic conditions do not improve or the 2010 outlook remains bleak.

Regarding real retail sales, twelve out of sixteen categories declined, led by automobiles (-19.35% y/y).  Among those categories with the heaviest weights in the index: food production (46.2% of index) increased slightly by 1.2% y/y and household goods rebounded strongly by 4% y/y; however, apparel contracted by 1.2% y/y.

One Response to "Colombia—Industrial Production and Retail Sales Plunged in November"

  1. Guest   January 21, 2009 at 3:25 pm

    Scary stuff, indeed. Colombia is rapidly approaching depressionary levels of industrial contraction (on an annualized basis). Peru’s economy is at the early stages of a manufacturing sector implosion (what worries me is that Peru’s construction sector has grown spectacularly, thanks to a run-away credit expansion fuelled by the central banks’s determination to keep the currency undervalued (from 2002 up to the present, almost 95% of Peru’s increase in foreign exchanges reserves is due to the central bank intervention in the currency market. They call it “posicion de cambio”…and the Peruvian financial press childishly believe it is some kind of a miracle due to the good “management” of the economy!!!). Argentina and Chile are already in recession. OK. Game over. Turn the lights off and let’s get the hell outta here.