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Colombia PMI May 2022

Colombia: Manufacturing PMI moderates in May

The Davivienda and S&P Global Manufacturing Purchasing Managers’ Index (PMI) fell to 53.9 in May from April’s 54.4. As a result, the index remained above the 50.0 no-change mark, pointing to a continued, albeit moderating, improvement in business conditions from the previous month.

The moderation was due to weaker growth of new orders and output, amid rising inflation, political uncertainty and strikes. Input inflation remained at historic highs, propelled upward by supply bottlenecks, raw material shortages and rising commodity prices provoked by the war in Ukraine. This said, the PMI remained above its 2021 average (52.5) thanks to robust demand. This contributed to backlogs growing at the second-fastest rate on record, in turn leading firms to hire employees at the briskest rate in more than eight years. Finally, election uncertainty, raw material shortages and rising inflation dampened business optimism.

Andrés Langebaek Rueda, economist at Davivienda, said:

“The figures from the official statistics body confirm that during the first quarter of the year growth of industrial production moderated. However, the PMIs for April and May suggest that in the second quarter we are going to see an acceleration in activity. This good behaviour, backed by good levels of domestic demand, seems to be registering in other activities such as commerce and services. This expansion in demand can only be explained by increased government spending and interest rates that remain low in real terms. Thus, it seems that price increases, despite being very high in historical terms, are not severely affecting growth of economic activity and that the central bank will have to accelerate its rate adjustment in the coming months.”

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