Colombia: Manufacturing PMI swings back into expansionary territory in April
May 2, 2019
Business conditions in Colombia’s manufacturing sector showed improvement in April, reflected by the seasonally-adjusted Davivienda manufacturing Purchasing Managers Index (PMI) swinging back into expansionary territory. The index rose to 51.0 in April, from 48.9 in March, thus moving above the critical 50-point threshold separating expansion from contraction. This marks a turnaround from the first-quarter’s run of losses, when the index remained below the threshold. April’s reading was still fairly meek, however, compared to the average recorded in 2018.
Stronger demand conditions fueled upturns in the growth of output and new orders in April. Firms hired more workers to deal with the increased backlogs of work, although the rate of hire slowed from March. Inventories also fell on raw material scarcity and scheduled maintenance works. On the price front, input costs climbed, as the peso lost ground against the dollar and supply disruptions erupted from protests by members of the indigenous community. Manufacturers raised output prices only marginally in response, opting to take most of the costs burden.
Commenting on the latest reading, Andrés Langebaek Rueda, Chief Economist Bolivar Group at Davivienda:
"Although the figures for the latest month give us back the optimism on the sector, it is important to highlight the apparent deterioration in the margins of firms in the manufacturing sector as a result of pressures on the cost of inputs, encouraged by the devaluation of the peso in recent months and the aforementioned closure of the roads. These input price pressures have not been completely transferred to the prices of the products."
Author: Nihad Ahmed, Economist