What Jumps Out : Getting Back to Normal?

Yesterday we saw the latest Industrial and Retail Confidence figure published by our friends at Fedesarrollo, and whilst there was some disappointment on the industrial side, it wasn’t all gloom and doom.

Industrial Confidence in August dropped to 15.6% from 16.3% the previous month, however it is important to highlight that only in May we were at -3.2%. Whilst levels of inventory and current volumes of orders were both lower than July it is also relevant that the expectations for production rose from 41.9% to 42.8% over the past 30 days. In the end what is to come is more important and that is key.

However, it is the retail side where I will spend more time today as in my opinion, Colombia has long since been an economy driven by the consumer. In terms of retail confidence, we saw a rise from 35.8% in July to 43.5% in the latest report, a sizable move and the highest reading in 40 years (see below). The only negative reading was with regard to inventory (-9.5%) however in the other areas, the economic situation of the business and economic outlook there were some notable gaps to the upside.

This would coincide with the picture across Colombia where commerce appears to be up and running once more after the pandemic. Last week in the latest Real Sector data for July, whilst Industrial Production was flat MoM we saw retail sales (26.9%) far outperform estimates as they continue to trend upwards. Tourists may not yet have re-appeared in droves however whether in Medellin or Cartagena, it is starting to get a table once more, bars are shopping malls are crowded and except for the facemasks in public locations, it is hard to believe COVID is still with us.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

No doubt with 33% of the country now fully vaccinated and a relatively low daily death rate – we are finally seeing an uptick in the confidence to step out of the house once again. The only reason why more people haven’t been vaccinated is the lack of supply, but we are seeing large shipments now arriving once more. One disconnect with all of the above is the Consumer Confidence reading for August which dropped to -8.2% (from -7.5%) when it was expected to tick up towards -5.1%. There is little explanation for this but with the tax reform completed we may see a better reading in September – quite clearly the didn’t manage to survey the throngs of people queuing to park their cars at the mall this past weekend.

This past week I have had a number of visitors from both Europe and the UK and they have all been struck by the normality of what they find, even if that means not getting a table, and snap-back is notable. There are areas of commerce such as Durable Goods and Housing which are still lagging on the propensity to buy scale, however in August we saw the first pick up in auto sales and the others may not be far behind – housing prices are certainly on the rise.

Finally for today, just to reiterate the point that I have made ever since the pandemic crested here in Colombia. This is a country with problems, unquestionably, poverty has risen, there is discontent with the Government’s actions in several respects and the current account situation speaks for itself. BUT, this is a country that for decades has built itself against a backdrop of problems and they are accustomed to overcoming them or circumnavigating them as quickly as any other.

That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops