The DANE over the weekend published February inflation and both the monthly reading of 1.66% and yearly figure of 13.28% were marginally lower than expected, however that 12m reading is still a 27 year high. Also Core CPI of 10.86% was well up on 10.43% in January. The largest contribution to the 1.66% was Food (0.32%), followed by Education (0.31%) & Housing (0.29%). Education appears after a lumpy increase of 8.5% MoM. Sectors that came in well below the headline number were Info & Tech (0.0%), Health (0.02%) & Alcohol/Tobacco (0.02%). If we look at the YoY figure of 13.28% it is Food (4.4%) that continues to be the main driver followed by Housing 2.3% & Transport (1.91%).
These numbers are inconclusive and will have the Central Bank wondering what to do in three weeks time. Analysts are expecting a 13.25% terminal rate between March and April but have we topped out on inflation? Having increased rates by less than expected last time to 12.75% perhaps the committee will once again opt for a more dovish outlook?
This week is extremely light on macro data. We have export numbers for January with analysts expecting US$4.15bn which would be well up on the US$3.8bn a year ago but well down on the US$4.49bn of December. The key will be the breakdown of the numbers, not just FOB but also the tonnage – both areas were propped up by coal sales over the past couple of months.
Many of the headlines this week will revolve around President Petro. The various reforms continue to be rolled out but despite the headlines Congress is likely, as per the tax reform, to strip back what the President is looking to do. The state council also blocked his plans to control the energy sector for the next three months.
The absolutely key takeaway from these developments is the fact that the institutions of Colombia are holding very firm. Presidents come and go in Colombia but unlike other countries around the region, there are a lot of checks and balances on what any administration wants to do after being elected.
Finally on the markets we had data last week that foreigners were Net Sellers of TES bonds in February – a total of US$878mn – that is lumpy and will have had an effect on the Peso. Speaking of which, it held up fairly well last week although China’s modest growth plans may have an indirect impact if oil slips.
Wishing you all a good week
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