- Colombia: Consumers have a better perception of current economic conditions and are more willing to expend
The Consumer Confidence Index (CCI) stood at -9.0 percentage points in July 2024, improving by 3.7 p.p. compared to the June balance (-12.7 p.p.), and recording the best result since January 2024 (chart 1). The result reflects a more favourable perception of households regarding their current economic conditions, coupled with a greater willingness to buy durable goods (chart 2).
The Economic Conditions Index increased for the third consecutive month, standing at -11.4 p.p. Households’ perception of their current economic conditions increased by 4 p.p. compared to the previous month, reaching -10.8 p.p., while the willingness to buy durable goods increased by 10.5 p.p. compared to the previous month, reaching -12 p.p., and reaching the best level since February 2020. The increasing willingness to buy by households may be associated with more favourable purchase prices, since goods inflation has remained below the target range for 3 months and even in July reached the lowest level since April 2021. Additionally, lower interest rates also help households to think in higher consumption.
The Expectations Index also improved, showing households more optimism about the future of the country. Households see the country as more likely to have good times in a 12-month period, however, the expectation about the future economic conditions of households and the country deteriorated, perhaps in response to economic growth that remains uneven among different sectors.
Consumer confidence has maintained a good dynamic in recent months, showing that the macroeconomic adjustment would contribute to a better perception of households regarding their economic conditions, while better prices and more favourable rates contribute to a greater willingness to buy. In the future, this dynamic could continue to contribute to easing the financial burden of households and supporting a gradual reactivation of domestic demand.
June retail sales and 2Q-2024 GDP data that will also be released this week could broaden the outlook on the behavior of commercial activity, this being a key sector for the country’s economy, representing nearly 17% of GDP. Household consumption of durable goods is expected to remain weak, however, this would not be a significant concern for BanRep for the moment, since some sectors such as agriculture and public administration would continue to counteract the slowdown in the commercial sector. A 75bps cut to 10% is our expectation for September monetary policy meeting; however, we continue to think that inflation data will guide the next step for BanRep.
Looking at the July details:
- The Consumer Expectations Index stood at -7.5 p.p in July, showing an improvement of 1.2 p.p compared to the previous month. Consumers see more likely that the country will have good economic times in the future, however, they are less optimistic that the economic conditions in their households within 12 months will improve.
- The Economic Conditions Index increased by 7.3 p.p compared to the previous month, standing at -11.4%. Consumers’ perception of their current economic conditions improved, while their willingness to buy durable goods increased. The willingness to buy housing increased substantially, standing at -26.6 p.p compared to -41.7 p.p the previous month, which is associated with much more favourable interest rates for this modality. Meanwhile, the willingness to buy vehicles fell by 3.1 p.p and stands at -54.1%.
- By socioeconomic level, consumer confidence increased at all income levels in July. At the middle-income and high-income levels, consumer confidence increased by 5.3 p.p. compared to June 2024, reaching -7.1 p.p. and -38.5 p.p., respectively. Low-income confidence increased by 1 p.p. compared to the previous month, reaching -8.1 p.p.
—Sergio Olarte & Daniela Silva
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.