Economy on gradual path to recovery.  The National Statistical Institute (DANE) released final first quarter Gross Domestic Product (GDP) figures in June.  The final data indicates that the economy expanded 2.2% in the first quarter over the same quarter in 1999, slightly below the 2.6% first quarter growth figure released by the National Planning Department (DNP) in May.  The data also revised 1999 annual growth figure from a 4.6% to a 4.3% contraction.  The slight upward adjustment resulted principally from revised investment data, which indicates that investment shrank 27.2% last year rather than 31.3%.

The first quarter GDP data shows that economic activity resumed at the beginning of the year.  While investment grew a healthy 10.7% over the same quarter last year, consumption growth remained modest at 2.3% for the same period.  Almost all sectors experienced some form of recovery, but key to the first quarter rebound was a strong 8.9% expansion in the manufacturing industry over the same quarter last year.  The commerce and transport sectors came in second both at 2.8% growth over the same period in 1999.  Construction remained mired in recession experiencing a 6.1% contraction over last year.  Construction has yet to recover from nine consecutive quarterly contractions since the fourth quarter of 1997.  Similarly, the financial services industry has still not recuperated from last year's banking crisis.  The first quarter data shows that the financial services sector again shrunk 1.0% over the same period last year.

Industry continued along a favourable path to economic recovery.  In April, DANE reported that industrial production grew 5.3% over the same month last year driven by healthy expansion in the chemicals, metals, paper and textile industries.  Nevertheless, the National Industrial Association's (ANDI) April industry survey, showed a slight deterioration in business confidence, driven primarily by the continued uncertainty over the economic trajectory for this year.  Of the businessmen surveyed, some 61.1% qualified the current situation of their company as unfavourable, up slightly from 58.3% in March.  Similarly, sentiment over the immediate future declined, with just 31.1% of the businesses anticipating that conditions in industry would improve in the coming months, down from 36.9% in March.  Some 32.3% of the companies polled, identified lagging demand as the key obstacle to further improvement in the Colombian business climate and 11.0% to a scarcity of working capital.  The major impediments to increased sales were the weakness of the internal market (35.7%), import competition (12.3%), contraband and unfair competition (11.9%) and export impediments (11.5%).  Despite the lagging business confidence, consensus panellists anticipate the healthy growth in industrial production to continue this year.  This month's survey confirms that industry is likely to recover strongly this year driven by the improved export environment.  In fact, sentiment among Consensus Forecast participants has improved, with industrial production growth expected to reach 6.6% this year, up from 6.3% last month. 

Consumption, however, continues to display a mixed picture.  On the one hand, the most recent DANE real retail sales data from March shows that retail sales experienced 3.3% growth year-over-year following the healthy 6.3% spike in February.  On the other hand, however, the May retail study conducted by the Nation Retailers Federation (FENALCO) showed that 48% of the businesses surveyed claimed that sales had dropped over the same month last year.  Similarly, the share of those businesses that claimed to have higher sales dropped from 39% to 31%.  Lingering uncertainty over the economic prospects this year, tight credit conditions and continued high unemployment (Q1 20.2%) are the main culprits behind the mixed signals emerging from recent consumption data.

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