What Jumps Out: What Does the Central Bank See?

This week kicked off with the key data point: Q1 GDP came in at 3%, which was below the consensus estimate (3.5%) — but only one sector, Construction (-3.1%), was in negative territory.

That number was driven by the public sector where Q1 Civil Works activity dropped by 14.9%, according to DANE. This followed a Q42022 decline of 12.8% in the sector, which was driven by fewer roads, tunnels, runways, and bridges. The rest of the GDP data was solid enough with Finance (+22.8%) and Arts/Entertainment (+18.7%) as the main drivers.

Import data for March was also down 16% YoY, per DANE, but at $5.85 billion, this was still above estimates. And with exports continuing to struggle, we consequently saw the Trade Deficit above just above $1 billion, which was $200 million above estimates and twice the last reading. All four sectors (Agriculture, Combustibles, Manufacturing, and Others) were down YoY. The main drivers were Oil/Derivatives (-38.7%), Chemicals (-22%), Manufactured Goods (-26.6%) & Transport (-8.5%).

Finally, again from DANE, the Economic Activity NSA for March came in at 1.6%, above the 1.3% anticipated but below the 3.0% registered for February (although that was also revised down to 2.4%).

If we add to the mix Bancolombia reporting another YoY decline in consumption — and in fact most every other macro indicator — one again is left shaking their head as to what the central bank saw two weeks ago when it raised rates to 13.25%.

Away from the macro data, we saw the pleasing sight of food retailers, including Grupo Éxito and Olympica, cutting prices on large baskets of staple goods following an appeal by President Gustavo Petro. Gustavo may have his critics, but it won’t be those who are paying less for their food or have lower energy bills or even have seen their loan repayments come down. On Thursday, we even had the EPM CEO discussing an energy price freeze in order to help CPI come down. All these areas have lowered prices/interest rates after direct intervention by President Petro.

Meanwhile, the president’s health reform, despite negative headlines, is crawling through Congress, article by article. However, how the final version will look or impact Colombia is hard to tell.

All this despite the U Party joining the Conservative Party in withdrawing their support from the coalition. The labor reform saw Ricardo Bonilla, head of the Ministry of Finance and Public Credit, stating to Congress that Colombia’s long-term unemployment rate would be above 10% — while central bank head Leonardo Villar, addressing the same body, said the labor reform would hurt job creation.

Amid all this, the markets have been quiet.

The Q1 results season has continued broadly positive, but equity volumes remain anemic with the COLCAP dropping 1.9%. The peso has also had a quiet week (+0.7%) with little in terms of movement — a refreshing change.

Want to watch Rupert’s commentary on this news?
View the latest What Jumps Out video on LinkedIn.