1Q GDP : Steady as she goes....

Titanic-0206

AS EXPECTED

Whilst 'Steady As She Goes' was likely a phrase used by Captain Edward John Smith as he stood on the deck of the Titanic as she set sail in 1912 and whilst the new reconstructed Colombia GDP basket needs a little bit of getting used to, it would appear an apt description of the data presented yesterday by the DANE, there is work to do of course but it adds further credence to the argument that whoever does take up the Presidential reins in August is going to inherit an economy that is moving very tidily in the right direction. The 2.2% number was fully as expected by most analysts and is further evidence of the recovery that has been seen since a year ago when we had the revised number of 1.2% which also coincided with the -30.2% Consumer Confidence reading which occurred during that quarter and represented an all time low for that data point. What somewhat confuses the occasion, especially as not all the information has yet to be published is the new composition of the GDP basket with the previous 9 categories having been expanded to 12, there is a sense of modernization with science and technology as well as home based occupations being included but nonetheless it isn't easy on the eye first time around. Ever since I have been in Colombia I have been struck by the capacity for the citizens of this country to consume and this is borne out once again in the latest GDP data with commerce accounting for a full 17.08% of the economy - it is of course a very broad church of activities but nonetheless a number that jumps out at you. In terms of what is growing YoY we find finance leading the way with 6.1%, it has been a rough 12 months for the banks in terms of growth but they are getting back on their feet as confidence picks up, there are issues still on the commercial side and the provisions situation has not yet been fully resolved however the direction is clear. Next up is the previous social services which has been relabeled and bundled together with defence and public administration, that area grew 5.9% - after that we get to Science & Technology (5.6%) & Arts/Recreation (4%). The final area growing at a healthy pace is Commerce (3.9%) and one would expect that trend to continue improving in line with confidence which hopefully will continue its resurgence - one caveat in this growth area is that in 1Q17 we had just seen the implementation of the new 19% VAT rate and that in all likelihood that impacted the number to some extent 12 months ago. Turning to the other end of the spectrum there was what can only be described as a shocker for Construction which fell 8.2% and when we look at the actual size of its contribution we can see that even on a seasonally adjusted basis it simply isn't getting a foothold despite the surge in mortgages and the prospects of the 4G build out which is now underway. Having seen the Civil Works disbursement number which dropped 7.1% in Q1 perhaps there is little surprise in yesterdays number for the sector but it is a disappointment - we have to back to Q1 2014 to find a moment when as a sector it contributed less to the economy. Also continuing to struggle are Mining (incl Oil) which dropped 3.6% as well as Industry which fell 1.2% - in terms of the latter the Industrial Production data has been pointing to a benign reading and in terms of mining we need to await the publication of the sub categories before knowing how the various areas have been faring, over recent years we have seen the effect of Reficar compensating for the drop in oil prices, one imagines that both areas have had good YoY performances. Central Bank head Echavarria seemed pleased enough with the number but also said that if we get to the 2.7% 2018 number that the Finance Ministry are expecting it would still be a disappointment however the expected growth for 2019 of 3.3-3.5% would be in line with the countries potential. Overall most analysts are expecting an acceleration as 2018 develops and there is no reason to question that idea, of course if Gustavo Petro were to win next month and try and impose his manifesto you would have to temper any estimates as confidence would certainly take a size-able hit, a simple example being his opposition to the 4G projects and belief that the mining sector needs to be reined - concerning to say the least.....he could represent Captain Smith's iceberg although Colombia has hit plenty of them in the past and survived.