- Colombia: Citi Colombia Survey—Inflation expectations increased, GDP growth projection fell, and market consensus expects a 50bps cut on Friday
- Peru: Cement sales return to negative territory in February
COLOMBIA: CITI COLOMBIA SURVEY—INFLATION EXPECTATIONS INCREASED, GDP GROWTH PROJECTION FELL, AND MARKET CONSENSUS EXPECTS A 50BPS CUT ON FRIDAY
The March Citi survey was released on Tuesday, March 19th. BanRep uses this survey as one of its indicators for inflation expectations, the monetary policy rate, GDP, and COP.
Key points included:
- GDP growth was revised to the downside again. Economist consensus now points to GDP growth of 1.26% in 2024, 1bps lower than previous expectations. In 2025, expectations point to 2.51% (-2bps vs. the previous survey). For 2026, the growth expectation fell to 2.91% (-14bps lower). At Scotiabank Colpatria, we revised our expectation for GDP growth to the downside; now, we expect a 1.4% expansion for 2024 and 2.2% for 2025, an expansion rate below potential.
- Inflation showed mixed changes. On average, headline inflation is expected to be 0.64% m/m in March, bringing annual inflation to 7.30% y/y (from the current 7.74%). Scotiabank Colpatria’s projection is at 0.71%, above consensus. In March, lodging and utilities will contribute the most to inflation, reflecting indexation effects in the case of rent fees. For December 2024, headline inflation is expected at 5.42%, up by 7bps versus the previous survey, while for December 2025, the expectation is at 3.70%, almost stable and within BanRep’s target range.
- Monetary policy: The majority of respondents expect a 50bps rate cut to 12.25%; only four analysts, including us, expect a 75bps rate cut, while one respondent expects a 25bps cut. As we mentioned in previous reports, the debate will be intense at the next meeting. Economic activity has weakened more than expected, while services inflation is reluctant to go down amid indexation effects. At Scotiabank Colpatria, we favour the scenario for a 75bps cut as it will maintain the contractionary stance relative to the real rate.
- For the year-end of 2024, most of the respondents expect a rate between 8% and 8.25% (chart 1), while for 2025, there is more consensus around 5.25%–5.50%, which suggests a terminal rate that will involve a real rate higher than the pre-pandemic rate. At Scotiabank Colpatria, we think the central bank will have space to cut rates by 75bps in each meeting of 2024, which makes us project a 7.50% year-end rate, while in 2025, we are aligned with consensus at 5.50%.
- Finally, surveyors expected the exchange rate to average 4,035 pesos at the end of 2024 (versus 4,060 pesos in the previous survey), while for 2025, it is expected to be 4,032 pesos. Scotiabank Economics’ projections show an exchange rate of 4,116 pesos in December 2024 and 4,150 pesos in 2025.
—Sergio Olarte & Jackeline Piraján
PERU: CEMENT SALES RETURN TO NEGATIVE TERRITORY IN FEBRUARY
Local cement sales decreased by 2% YoY, in February 2024, according to the Cement Producers Association (Asocem). Sales volume, 890,000MT, was the lowest since June 2020. Cement sales, which had risen 13% YoY, in January, dipped again into negative growth, as occurred between September 2022 and December 2023. Note, however, that January growth also reflected a low base effect, as sales in January 2023 were affected by social protests.
Cement sales in February were below our forecast and were particularly surprising given that this February had more working days than in February 2023 because of the leap year. Although the sales result affects the expected growth of construction GDP in February, this may be offset by the performance of public investment. Public investment was up nearly 53% YoY in February, mainly driven by the increase in investment by local and regional governments.
We expect construction GDP to perform positively in future months, partly due to a base effect, considering that it showed negative year-on-year growth throughout 2023. Additionally, the sector has not been affected by severe weather conditions as feared. The execution of infrastructure, real estate, and public investment projects will boost the construction sector. Finally, the lower inflation expected for 2024 should improve household spending capacity, partly encouraging investment in the self-construction segment, which annually demands more than 50% of the cement sold in the local market.
—Carlos Asmat
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