- Colombia: May’s retail sales and manufacturing beat expectations
On Tuesday, July 15th, the National Institute of Statistics (DANE) published the manufacturing production and retail sales data for May 2025. Manufacturing production increased 3.0% y/y, above market expectations (2.0% y/y), and retail sales increased 13.2% y/y above market expectations (12.1% y/y). These results are encouraging for economic growth. As observed, household consumption continues to follow a positive trend, and industrial sectors that experienced a downturn last year are now showing signs of recovery and contributing to the overall boost.
Manufacturing output increased by 3.0% y/y (charts 1 and 2), driven by higher sales in vehicles, apparel, and food and beverages. The May results reflect a positive turnaround in the manufacturing sector compared to the same month last year, when output contracted by -3.5% y/y. Seasonally adjusted data also showed a 2.0% m/m expansion. Within this context, the food, chemicals, and apparel industries contributed positively to the overall increase, partially offset by declines in the iron and steel, oil and fuel, and metal products sectors.
Retail sales maintained their positive momentum (charts 3 and 4), recording the highest expansion in the past three years. In May, retail sales rose by 13.2% y/y, while seasonally adjusted data (excluding vehicles) showed a 0.7% m/m increase. The annual growth was driven by strong performance in vehicle sales, telecommunications equipment, and durable goods such as household appliances and other domestic products. This robust performance is occurring despite persistently high interest rates and inflation that has yet to fully normalize. This may suggest that Colombian households are getting used to the current context and engaging their consumption decisions with better confidence. As we have seen, households are using credit moderately and instead the savings buffer remains solid, leading us to think that the recovery of the private consumption has stronger bases compared to the post-pandemic rebound.
On Friday, July 18th, DANE will release the Economic Activity Index for May 2025. This release will be key to monitoring the structural adjustment of the Colombian economy, where sectors such as commerce and manufacturing are emerging as the main drivers of growth, in contrast to services like leisure and the public sector, which have lost momentum. The recent economic performance provides an additional reason for the central bank to remain cautious. Accordingly, the board decided to keep the policy rate unchanged at its June 27th meeting, in line with market expectations. In our view, although economic activity is showing solid performance, the output gap remains negative and recent inflation data has surprised to the downside. For these reasons, we see room for a rate cut at BanRep’s upcoming meeting on July 31st, potentially bringing the policy rate down to 9%.
Highlights:
- Manufacturing production increased 3.0% y/y. 25 of the 39 activities showed annual expansion. On the positive side, food (+19.5% y/y), chemical products (+13.2% y/y), apparel (+12.7% y/y), and mineral products (+7.1% y/y) contributed +2.3 ppts to the result. On the negative side, the iron and steel industry (-16.6% y/y), the oil and fuel industry (-7.4% y/y) and metal products (-8.9% y/y), were the main sectors offsetting the boost in the period, contributing with -1.9 ppts
- Retail sales grew by 13.2% y/y. The 19 activities registered positive variations. Vehicle sales (+29.8% y/y for household vehicles and +15.8% y/y for other ones), telecommunications equipment sales (+56.5% y/y), and household appliances (+23.3% y/y) were the ones that contributed the most to retail sales growth. It’s important to highlight the increase in apparel in 2025 after almost two years of contraction, but still below pre-pandemic performance.
- From June 2024 to May 2025, retail sales expanded by +7.7% y/y where apparel sales experienced a drop of 4.4%, while the sales of telecommunications equipment have had the best contribution to the result with an expansion of +39.4. Furthermore, during the same period, the manufacturing output dropped -0.2% y/y explained by the pharmaceutical industry (-9.5% y/y), oil and fuel production (-5.6% y/y) and the beverages industry (-1.8% y/y). In contrast, transport equipment (+31.1%) and the cleaning industry (+3.8%), maintain a positive contribution in the indicator.
—Valentina Guio
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