What Jumps Out: Shoots Of All Colors

This week we saw more indications of an economy that is gradually heating up. Anecdotally it is hard to avoid the conclusion that the new normal has been fully adopted and the macro data is started to support that thesis.

Inflation for September (0.38%) was marginally ahead of consensus as the 12m rate pushed up to 4.51%. Whilst still moving up there is a feeling among local analysts that we are approaching the ceiling and that CPI will fall back in 2022. This follows on from last week’s decision to raise rates to 2.00% – the first change in 18 months, more rate increases are expected over the next couple of months, although judging by the Central Bank minutes the moves will not be radical as most of the committee members feel that the inflation pressures are temporary. The committee noted that the economy has recovered dynamism in Q3 and that it is being driven by internal demand.

In keeping with this sentiment, the World Bank this week increased their GDP outlook for the country. They have raised their 2021 estimate for the Latam & Caribbean region from 5.2%-6.3% – this still won’t make up for the shortfall in 2020 however we are moving in the right direction. Of concern is the Bank’s observation that the same region will grow only a ‘mediocre’ 2.8% & 2.6% respectively in 2022 & 2023.

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

Colombia will fare well in their eyes. They have increased their 2021 GDP estimate from 5.9%-7.7% and whilst that is still short of the advances in Chile (10.6%) & Peru (11.3%) once we get to 2022, Colombia’s expected growth of 4.2% is anticipated by the World Bank to be the regional leader. Further out they expect Colombia to grow 3.9% in 2023.

These headlines are most pleasing, but the recovery of the broader economy can’t be expected to move in a linear fashion – namely because in the middle of that region leading 2022 politicians will appear on every street corner as the Congressional and Presidential elections take place. As per the rest of the globe, life would be simpler without politicians preaching populism and fear in fear in order to win the day.

This all jives with Fedesarrollo who yesterday reported the Consumer Confidence number for September was better than expected. Analysts were expecting a modest improvement to -6.4% from the -8.0% recorded in August, but instead the number was -3%.

Of course no-one wants to be in the RED but in May we were at -34.4%. Boring down just briefly we see that Consumer Expectation rose from 6.2% to 14.2% & the Index of Economic Conditions rose from -29.9% to -28.7%, still a drag on the overall number. In terms of the propensity to buy we find improvements in all three areas : Housing -0.5% (Aug -5.1%) : Durable Goods -44.3% (-45.1%) & Vehicles -43.8% (-44.9%).

Some of this may finally be starting to filter through to both the stock market and Peso – both have outperformed the region over recent sessions – again time will tell but we are starting to see the shoots of recovery.

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