What Jumps Out: Looking at the Economy Before the Start of Another Long Weekend in Colombia

The highlight of the week remains the June unemployment. Aside from the 8.8% (urban) and 9.3% (national) readings, the other standout number was the 1 million jobs added over the past 12 months. Granted 500,000 have joined the active labor market over this period when the central bank has raised rates and choked off the economy. But is full employment approaching?

Meanwhile, speaking of the central bank, Banco de la República left rates at 13.25% at its meeting this week. No surprise. And it released its latest economic forecasts, lowering their 1.0% GDP estimate for 2023 to 0.9%. This looks conservative — as does the 1% projection for 2024, In terms of inflation, the bank is looking for 3% at the end of 2024. CPI is now falling, due to higher rates, a stronger peso, and falling food prices.

National Administrative Department of Statistics (DANE) reported export date for June ($3.98 billion USD) was in line with expectations but down 27.5% year over year. In FOB terms, the driver was the commodity space (-38.9%) with both coal (-48.5%) and oil (-32.6%) suffering. On the brighter side(?), oil exports rose 14% in tonnage terms, but this didn’t help sales given the downturn in Brent prices. Coal fell 17.2% in tonnage terms and accounted for over 100% of the total decline in tonnage, which fell 7.8% year over year.

The other significant macro number was the Banco Davivienda PMI reading for July (48.4), which continued in the red and was down from the June print (49.8). Interestingly, XM reported that for June, not a direct comparable, energy demand rose 6.02% year over year. The breakdown was +8.2% (Homes & Commerce) and +1.24% (Industry) in a slowing economy. However, much of this can be explained by the arrival of El Niño, as the Caribbean Coast saw a 11.84% increase as the temperature rose.

According to FENALCO – ANDI – Asociación Nacional de Empresarios de Colombia, new vehicle sales for June fell by 40% to 13,091. Much of this is down to the peso weakness since 2021. The question now, with new car prices falling, is how quickly the strengthening peso will feed through to the showroom?

In the latest EL Niño decree, authorities will impose a 1,000 Colombian peso ($0.25 USD) on the electricity bills of the top three socio-economic groups (Stratos 4, 5, and 6) and the funds will be delivered into a fund to help La Guajira’s poorest sectors. Industry will contribute a further 5,000 pesos ($1.25 USD) per bill. The total raised should be $12.4 million USD (look out for more to come).

The reform process saw a few headlines but no actual developments.

The peso has fallen to 4,100 to the US dollar this week amid a regional selloff. The latest report from Fitch Ratings regarding the US was the root cause, and the Colombian peso was ripe for profit taking.

The equity market traded anemic volumes once again as stocks were pushed around by external events.

That’s about it for now. There are so many long weekends that many didn’t realize there is another one pending!

Never miss Rupert’s latest commentary
Follow him now on LinkedIn to see What Jumps Out