Colombian Update June 22 : Whats New (S) : Confidence, Construction, Imports, Energy.

CONFIDENCE

Fortunately the Consumer Confidence survey was taken before Yuya Osaka headed past David Ospina earlier this week, I was across several different locations during the 90 minutes, it was a depressing sight - 90% of the population went to work in their bright yellow shirts and frankly by mid-morning it felt like a wake, no-one quite believing what they had seen, there are still possibilities but without question Colombia are about to take the road less travelled to arrive in Round 2. There are perhaps three aspects which I feel are vital in gauging the mood of the Colombian economy and for two of them we have had tidy numbers recently. Above all the confidence data is a fine thermometer in this wantonly consumer society, I would happily compare a Colombian at the shopping mall to a five year old in the now defunked Toys ‘r' Us, They simply love to shop - saving rates may have improved significantly over the past decade but not enough to deter or impact the locals capacity to fill their houses or apartments with the latest paraphernalia, regardless of whether they need it. If you have waded through my words over the past twelve months you will know that I have made it crystal clear that CC is key and the 8.9% reading for May was a significant step forward, it may well reflect the increased belief that Ivan Duque was a strong favourite to win the election but also the continuation of a trend that started in early 2017 with the lowest all time reading and this time around the number surprised every analyst on the street. This was the highest reading since July 2015 and versus May 2017 (-16.9%) well, the numbers speak for themselves, whilst it is correct to countenance caution we are slowly but surely getting to the situation whereby it may be time to declare the start of a bullish trend in the consumer market. As per April it wasn't just one aspect that moved the dial instead it was both sides of the equation, Firstly in terms of the current situation we saw the first positive number in 36 months and there within that there was a sizeable jump in the propensity to buy durable goods. Looking forward the outlook survey reported a 13.5% reading, up from 6.1% in April and of course from May 2017 when it stood at a lowly -12.4% - the responses reflected what we already know, the economy is starting to truck in the right direction. Looking at the regions there was somewhat obviously a jump in all of the main population centres and overall one can only imagine that if the economy continues to improve then confidence will move in lock-step upwards - Retail Sales will be the one to watch come May having recorded a big number in April.

CONSTRUCTION Perhaps with the exception of agriculture there is no sector that is more important to Colombia's short term economic prospects and long term social advancement than construction - whilst apartments continue to grow like weeds here in Medellin in the end the massive 4G project will bring now only added GDP growth but also significant change to the whole of the country, improved and cheaper mobility is one vital thing but these highways will also help bring is institutionalization and law to areas that have never seen it. A couple of days ago we had the latest cement demand data for April which saw a very encouraging number - some may say there is an Easter calendar effect but that can't possibly account for the 13.9% reading in shipments, the first positive number in six months. The RMC number for the same month was much more benign with a 0.7% increase which is a fair reflection of a sector still struggling to find a toehold in the ongoing economic recovery but it was indeed a very mixed picture. We saw housing demand rise 0.7% whilst other buildings fell 15.9% however for followers of 4G where the picture is lot, lot more rosy than many wish to paint it - we saw a 28.2% growth in Civil Works demand which accounted for 22.9% of the total. Finally if we look at the Construction Licence data, again for April, which is obviously a leading indicator, we find a 15.7% increase YoY however once again we are just about getting struggling back to the surface as YTD we still find ourselves in negative territory (-5.6%). There is still a mixed picture which supports the RMC data with housing this time domination the licencing whilst non-residential fell 14.2% YoY. IMPORTS Finally in our macro round up we come to imports, are Colombians still snapping up the consumer durables ? April saw an increase of 5.1% and indeed the consumer goods were at the forefront rising 25.9% and accounting for 24% of total purchases - this all reflects back to the confidence data we already discussed, there is no coincidence - we find non durable goods rising 30.5% and durables 20.8%, the Retail Sales data for April already hinted at such a pick up. Could it be a World Cup effect ?, perhaps to some extent but why buy a TV in April for an event that begins in mid-June, the May data for both Retail Sales and Imports will tell us more. Other areas that contributed to the increase included equipment for construction & manufacturing which are encouraging however there was a marked drop in transport (48.2%) which dragged like an anchor on the overall data.

YTD as per all of the data discussed today there dynamics are still modest with a 2.3% increase in imports however as domestic demand and the economy edge in the right direction it is hard to believe we won't see a further pick up in overseas purchases. In terms of the trade balance for April we find a US$324mn deficit which is down YoY and when we zoom out we find a YTD deficit of US$1.9bn, way down on the US$3.1bn of 2017 however this is a reflection of the pick up in exports, particularly oil, during the early part of 2018.

ENERGY

Finally for this week Hidroituango is back in the news and it is all a touch bitter-sweet, or sweet and sour if Asian food is more your fancy. EPM this week reported that by October the crisis in terms of a potential failure of the dam wall will have been fully averted, helped in no small way by a biblical change in the weather from pouring rain to burning sun, and that is tremendous news of course for the 113,000 villagers living in harms way. On the other side they are now suggesting, if everything goes to plan, that by 2021 the dam will be in fully operational - without wanting to be a party pooper we are currently in 2018 and that seems a long time away and that of course is if everything goes to plan and little over recent months has.....fingers crossed !