|
Industry
continues to lose ground
In
February, industrial production grew 8.8% over the same month last year,
which was above the 5.9% expansion registered in January and beat market
expectations, which had anticipated industry to grow 6.7%. The February
increase was broad-based with 34 of 48 production categories expanding
over the same month the year before. The main drivers of the February
reading were iron and steel production as well as in oil refinement.
Despite the strong monthly reading, annual average growth in industrial
production continued to decline, falling from 10.0% in January to 9.5%,
which represents the slowest pace since October 2006. Thus, the figure
further confirms the moderating trend begun in August last year, which had
broken with a string of 15 consecutive months of double-digit growth.
Consensus Forecast participants anticipate industrial production growth
will moderate further to 7.2% in 2008, which is up 0.4 percentage points
from last month’s forecast. In 2009, the panel expects industrial
production to moderate to 5.7%.
Consumer confidence
rebounds strongly
After having grown at a
brisk pace last year, the economy is set to moderate this year. However,
for the time being, the economy is still expanding at a robust rhythm and
recent indicator releases suggest that economic growth will remain strong
in the months ahead. According to Fedesarrollo, the consumer
confidence index (ICC) increased to 30.1 points in March from 23.7 points
in February, which had marked the lowest reading since December 2005. The
improvement was broad-based, as all three categories composing the index –
macroeconomic expectations, the acquisition of durable goods and economic
expectations for the next year - were up strongly over the previous
month’s reading, which had been affected negatively by the diplomatic
tensions between Colombia and its neighbours. Furthermore, the index
remains well above the 0-point threshold that separates optimism from
pessimism, suggesting that private consumption will continue to help
buttress economic growth in the following months. In addition,
unemployment in March reached 11.1%, down from the previous month’s 12.0%
reading, as well as below the 12.0% registered the same month last year.
Nonetheles, unemployment is expected to end the year at 10.1%, above the
9.9% recorded last year, which will probably trigger a decline in consumer
spending. Furthermore, the Central Bank is expected to raise interest
rates this year in an attempt to rein in inflation pressures. For this
year, the government expects the economy to grow 5.0%.
Consensus
Forecast panellists are more optimistic than the government and anticipate
economic growth to reach 5.4% in 2008, which is up 0.1 percentage points
over last month’s forecast. For 2009, the panel expects economic growth
to moderate to 5.0%.
Central
Bank extends capital controls
In April,
consumer prices added 0.71% over the previous month. The figure came in
below March’s 0.81% result, but was above market expectations, which had
prices adding 0.62%. The monthly price rise was broad-based, as seven of
the eight categories composing the index increased over the previous
month. That said, the primary drivers of the price hike were strong
increases in food and housing prices. The price spike in housing
continued to reflect higher fuel prices, which are included within the
overall housing category. In spite of the strong price increase
registered in April, annual headline inflation fell from 5.9% in
March to 5.7%. On 25 April, before the publication of the April inflation
data, monetary authorities decided to keep the benchmark interest rate
unchanged at 9.75%. The Bank has raised interest rates 15 times since
April 2006, lifting rates by 25 basis points the last time on 22 February,
as inflation exceeds the upper end of the Bank’s target range of
3.5% to 4.5% for this year. Monetary authorities cited the positive
results from the previously implemented monetary tightening and global
uncertainty, especially in the United States, as the main reasons for
their decision to leave rates unchanged. The Bank also stated that
existing capital controls would be extended to include mandatory deposits
for import financing beyond six months as well as some types of borrowing
abroad. Consensus Forecast panellists expect inflation to further
moderate to 5.1% by the end of this year, which is up 0.2 percentage
points from last month’s estimate. Next year, panellists anticipate
inflation to moderate to 4.3%, which is within the Central Bank’s target
range.
|
