- Colombia: Economic activity fell short of market expectations in August
On Monday, October 20th, DANE released the Economic Activity Indicator (ISE) for August. The indicator showed a year-over-year (y/y) increase of 2.0% (chart 1), below the Bloomberg survey median (3.2% y/y) and slightly below Scotiabank’s forecast of 2.2% y/y. Six out of the nine sectors included in the index posted positive annual variations. Seasonally adjusted figures reflected a 1.8% y/y expansion in economic activity. On a monthly basis, activity dropped by 2.1% m/m (seasonally adjusted), in contrast with the 2.9% m/m jump observed in July (chart 2).
The deceleration in economic activity was partially explained by seasonal factors and a higher base effect. Notably, August 2025 excluded one additional business day compared to August 2024, totaling 24 working days (including Saturdays). Additionally, economic activity in the previous month registered an unexpected rebound of 4.4% y/y, which established a higher comparison base for August.
The services sector accounted for nearly the entire positive performance, contributing 2.2 percentage points (ppts) to overall economic growth (charts 3 and 4). Commerce, transportation, and housing expanded by 5.8% y/y and contributed 1.2 ppts. This was followed by public administration and leisure growing by 3.2% y/y and contributing 0.8 ppts, but showing a deceleration compared to July. In contrast, primary and secondary activities offset the result. Agriculture and mining contracted by 2.0% y/y (-0.3 ppts), mainly due to declines in coal and oil production within the mining industry. Followed by manufacturing and construction which contracted by 0.6% y/y subtracting 0.1 ppts from the total result.
Year-to-date, the Colombian economy has grown by 2.6%, same as our full-year projection of 2.6%. Despite the calendar effect observed in August and the base effects from July, structural trends continue to indicate that private consumption is driving the economic activity. This momentum is explained by historically high remittance inflows (+14% YTD up to August) and favourable FX performance. However, sectors linked to investment remain weak in their recovery which has affected long-term activity in Colombia. Regarding monetary policy, we maintain our expectation that the central bank will hold unchanged the interest rate at 9.25% at least through Q2 2026.
Highlights:
- The primary sector continued to contract notably in August, with both agricultural and mining activities declining by 2.0% y/y, contributing -0.3 ppts to overall economic performance. The downturn was mainly driven by weak results in the mining sector, due to a decrease in coal production and a 3.5% y/y drop in oil output, according to ANH data. These factors were reflected in a 21.1% y/y decline in mining exports. Agriculture also showed a negative trend, though with mixed signals: while exports surged by 30% y/y, the supply of agricultural products decelerated by 0.9% y/y and contracted by 6.95% m/m in August.
- Secondary activities declined by 0.6% y/y, contributing -0.1 ppts to overall economic growth, with construction showing a negative trend. The manufacturing output indicator for August rose by 1.0% y/y, falling short of Bloomberg’s survey expectation of 4.0% y/y. Within manufacturing, the strongest contributions came from the oil industry (+17.0% y/y), chemical products (+11.7% y/y), transport equipment (+42.0% y/y), and pharmaceutical products (+7.0% y/y). In contrast, the iron and steel industry (-22.7% y/y), beverages
(-4.4% y/y), and cocoa production (-18.9% y/y) were the main sectors offsetting the overall boost. - In construction, mixed effects were observed. Home sales increased by 2.4% y/y in August. However, civil works contributed negatively to the sector’s performance, and construction licenses registered a significant drop of 15.1% y/y in August, which explained the decline in the overall sector.
- The services sector continued to expand, with six service categories recording positive annual variations. Commerce and related services—including transportation and housing—were among the top contributors, with retail sales rising by 12.4% y/y in August. Personnel and cargo transportation activities, both air and land, showed positive performance, in contrast to housing, which recorded a negative variation amid a decline in the hotel occupancy rate from 53.1% in August 2024 to 52.1% in August 2025. Overall, the sector grew by 5.8% y/y, contributing 1.2 ppts to total economic growth.
- Public administration—which includes education and health services—and leisure (+3.2% y/y, +0.8 ppts contribution) were supported by public sector payments. Education showed growth, while health services recorded a negative trend. In leisure, the sector maintained its positive momentum, driven by major cultural events such as concerts and online sports betting. This was followed by real estate (+1.8% y/y, +0.1 ppts), financial and insurance activities (+2.0% y/y, +0.1 ppts), utilities (+2.1% y/y, +0.1 ppts), supported by the recovery of water reserves that boosted hydroelectric generation, though partially offset by negative gas production, and professional activities (+0.8% y/y, +0.1 ppts), which maintained growth. In contrast, communication services declined by 0.2% y/y, contributing -0.1 ppts, explained by fewer communication contracts across various sectors.
—Jackeline Piraján & Valentina Guio
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