Colombia: Manufacturing PMI moderates further in January; conditions continue to improve
The seasonally-adjusted Manufacturing Purchasing Managers’ Index (PMI)—produced by IHS Markit and Davivienda—dropped to 52.6 in January from 53.1 in December, marking a seven-month low. Despite the fall, the index remained above the 50-threshold, signaling a continued, albeit softer, improvement in business conditions compared to the prior month.
January’s moderation came amid new orders growth moderating to a seven-month low, largely due to high price pressures and muted demand for certain goods. Additionally, output grew only marginally in January, with growth softening to the slowest rate since July 2021. Production was held back by raw material and staff shortages. Turning to prices, input inflation continued to rise amid shipping issues, currency weakness and a scarcity of raw materials. Firms passed on the burden to clients, leading to higher output prices. More positively, producers reported some easing of supply chain bottlenecks. Lastly, employment levels rose solidly in January, supported by firms’ optimism with regard to output expectations in the coming 12-month period.
Andrés Langebaek, chief economist at Davivienda, noted:
“The PMI data for January is in line with what we expect for 2022: a slowdown in economic growth both in the world and in Colombia. As a result of a more rapid normalisation of global interest rates and the moderation of fiscal stimuli in most parts of the world, global economic growth is expected to moderate. In the case of Colombia, the most important concern for this year has to do with investment behaviour. Expectations of higher interest rates, a higher country risk premium and currency devaluation are not supportive of a good investment climate. We have to add that this is an electoral year in which very different economic policy proposals are debated, which generates an increase in uncertainty and the postponement of investment decisions.”