Colombia: PMI falls for the fourth consecutive month in November amid wider global slowdown in manufacturing activity
December 3, 2018
Colombia’s manufacturing sector lost pace for the fourth consecutive month in November, reflecting a wider slowdown in manufacturing activity worldwide amid intensifying trade war tensions. The seasonally-adjusted Davivienda manufacturing Purchasing Managers Index (PMI) fell to 51.6 from 52.0 in October. The index thus moved closer to the crucial 50-point threshold that separates improvement from deterioration in the sector, reflecting a weaker rate of expansion in manufacturing activity.
November’s print reflected a slowdown in growth of output and new orders. Reduced customer demand and stiffer competition resulted in a softer upturn in new orders and thus output. Shortages of inputs also weighed on output, while a weaker expansion in new business led to a decline in backlogs of work for the first time in three months. Firms reduced their payroll numbers as a result, citing a drop in sales and restructuring plans, which saw employment fall for the first time in nine months. Shortages, delayed price adjustments and the relative strength of the dollar caused a marked rise in input prices. Manufacturers raised their output prices in response, to transfer the burden of cost-adjustment onto consumers. Despite the downturn, business sentiment in the sector remained upbeat, with a solid outlook on output over the next year.
Commenting on the recent result, Andrés Langebaek Rueda, Chief Economist Bolivar Group at Davivienda, stated:
"For the first time in ten months, employment in the industry contracted, which reaffirms that the sector is losing momentum. With the new information, we have some degree of certainty that manufacturing activity will grow less in the last quarter of the year than what was observed in the last two quarters. The behaviour of input prices shows that the recent devaluation of the peso, associated with the fall in the price of oil and the appreciation of the dollar worldwide, begins to play an important role by pressing the costs at producers and decreasing their margins."
Colombia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 4.6% in 2019, which is up 0.5 percentage points from last month’s forecast. For 2020, panelists expect growth in fixed investment to accelerate to 3.9%.
Author: Nihad Ahmed, Economist