Colombia: PMI drops to seven-month low in December
January 2, 2019
Colombia’s manufacturing sector expanded at broadly the same pace in December as it did in November. The seasonally-adjusted Davivienda manufacturing Purchasing Managers Index (PMI) fell to 51.5 in December, from 51.6 in November, thus inching closer to the critical 50-point threshold that separates improvement from deterioration in the sector and reflects a slightly weaker pace of expansion in manufacturing activity.
December’s print, which marks the lowest reading in seven months, reflects softer growth in output and new orders. Growth in output and new orders were the slowest in seven and nine months respectively. Muted demand and strong competitive pressures restrained the pace of increase. Outstanding business declined at the fastest rate since March and firms reduced their payroll numbers in response. On the price front, a weak peso, higher international prices, and shortages in raw materials fueled an increase in overall input prices. Consequently, firms raised their output prices, with output inflation accelerating to a 15-month high. Meanwhile, business sentiment in the sector sank to the lowest in 11 months.
Commenting on December’s reading, Andrés Langebaek Rueda, Chief Economist Bolivar Group at Davivienda, stated:
"The reason that seems to be behind the deceleration in the behaviour of manufacturing is demand weakness. In addition to the weakening in external demand, which we have been commenting on in past months, it should be remembered that in the last part of the year consumer confidence fell significantly associated with the uncertainty related to changes in tax regulations.”
Author: Nihad Ahmed, Economist