Colombia: Imports rebound in October and reflect improved domestic demand.

Florencia Vazquez,Gustavo Arruda,Marcelo Carvalho,Nader Nazmi - Market Economics
Daily Latam Spotlight | 13 Dec 2012 06:00 |

Colombia: Imports rebound in October and reflect improved domestic demand.

COLOMBIA

Imports rebounded in October. Imports increased to USD 5.2bn in October from USD 4.8bn in the year-ago period, reflecting a 7.8% y/y increase. Imports rose 8.6% in the first eight months of the year over the same period in 2011.

Last month, the central bank’s board cited weak imports (-9.0% y/y in September) as a factor in its decision to cut its policy rate. October’s imports data should help alleviate such concerns.

Manufacturing imports increased 6.1% y/y and accounted for 63% of October’s total imports. Imports of oil and mining sector products rose by 20.5% y/y in October. This compares unfavourably to 41.9% y/y growth in the first 10 months of the year, and a 42.1% y/y increase in the 12m period ending in October.

Consumer goods imports rose by 22.4% y/y, the strongest showing since February 2012. Further underscoring the strengthening of consumer confidence, imports of durable consumer goods surged 30% y/y. Intermediate goods imports increased 12.7% y/y.

Capital goods imports fell 5.2% y/y largely because of reduced demand for such products in the agriculture sector (-16.9% y/y). On the bright side, imports of industrial-sector capital goods rebounded 13.2% y/y, following a drop of similar magnitude in September.

We already knew from the data released last week that exports contracted 7.6% y/y in October. The trade balance narrowed from a USD 440mn surplus in September to nearly zero (USD 22mn) in October. October trade data are positive for the economy as they reflect a moderate recuperation in both external demand and domestic demand.

Central bank survey shows well-anchored inflation expectations. Economists participating in BanRep’s expectations survey project December inflation of 0.30% and year-end 2012 inflation of 2.64%. They expect inflation to rise to 3.10% by year-end 2013, slightly above the mid-point of the target range. They see the central bank remaining on hold until October 2013, and ending the year with a policy rate of 5.0%, up form 4.5% currently.

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