Economy records quickest upturn since Q2 2022 in Q3

GDP reading: According to a preliminary reading, GDP growth improved to 1.0% on a seasonally adjusted quarter on quarter basis in the third quarter, up from 0.2% in the second quarter and marking an over two-year high. Moreover, Q3’s reading overshot market expectations. On an annual basis, economic growth slowed to 1.5% in Q3, from the previous period's 2.1% increase.

Drivers: The services sector grew 0.9% over the previous quarter in seasonally-adjusted terms in Q3, picking up from the second quarter's 0.1% increase. Households running down savings could have underpinned services activity in the period, in addition to solid real wage growth and low unemployment. In addition, the industrial sector gained steam, growing 0.9% in Q3 (Q2: +0.3% s.a. qoq), likely aided by resilient external demand. The primary sector grew 4.6% in Q3, contrasting the 0.2% contraction recorded in the previous quarter.

GDP outlook: Our Consensus is for the economy to lose steam in Q4 following Q3’s above-trend growth.

Panelist insight: BBVA analysts were downbeat on prospects for 2025: “Although GDP growth during 3Q24 represents favorable data for this year's growth, it is unlikely that this same dynamism will extend to 2025, in a context of uncertainty for investment derived from the recent judicial reform, in addition to the fiscal consolidation already announced by the current administration.” In a similar vein, Credicorp Capital’s Daniel Velandia said: “We anticipate a more pronounced adjustment in total investment starting in 3Q24 due to the easing of election-related effects, delayed nearshoring investments, and still tight monetary policy. With no more evident signs of a recovery in investment and subdued public spending, these factors will significantly affect growth in 2025.”

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