Colombia: Economic activity growth ebbs in May
Economic activity growth cooled to 2.4% year on year in May, following April’s 5.6% increase. Despite the moderation, the reading beat market expectations. May’s slowdown was largely driven by a notably less favorable base of comparison and softer increases in the agriculture and services sectors. Moreover, the industrial sector swung into contraction.
Meanwhile, the trend improved modestly, with annual average economic activity growth coming in at 1.0% in May, up from April’s 0.8%.
On a monthly basis, economic activity dropped 0.4% in seasonally adjusted terms in May, contrasting April’s 2.0% expansion.
Despite May’s slowdown, year-on-year economic growth accelerated on average in April–May from Q1, supporting our Consensus that the economy gained momentum in Q2. On the expenditure front, our panelists expect fixed investment and government expenditure to have returned to growth in the quarter, and they forecast improvements in private consumption and exports of goods and services.
Santiago Tellez, analyst at Goldman Sachs, commented:
“We expect activity’s momentum to slow in coming months given temporary boosts from off-cycle crop harvesting and accelerated energy generation due to the dry weather exacerbated by El Niño. […] We view these headwinds as likely to be mitigated by robust workers’ remittances and resilient household services consumption.”
Analysts at Credicorp Capital added:
“While the primary sector exhibits volatility in growth figures, it does not fully offset the slowdown observed in both private investment decisions and modest household consumption dynamics. […] we can only expect a modest recovery of private investment amid elevated political and regulatory uncertainty with proposals to change the rules of the game in strategic sectors.”