DANE will provide information on inflation for April, data that will indicate how El Niño affected public service rates and whether inflation continues to decline.
May begins with very relevant economic data that is analyzed by Scotiabank Colpatria economists. Included are the results of the first quarter of the Colombian economy, the impacts of weather phenomena on business, the contribution of Mother’s Day to consumption and the effects of the war in the Middle East on the Colombian economy.
Colombian economy in the first quarter of 2024
In mid-May, the National Administrative Department of Statistics (DANE) will release the results of the growth of the economy in the first quarter of 2024. This will make it possible to evaluate the recovery of economic activity after the fourth quarter of last year, affected by various factors such as the rise in interest rates and inflation, especially in sectors such as construction.
This result is relevant to understand if the gradual recovery is underway and if some situations, such as the low exchange rate, can benefit importers.
Effects of weather phenomena on the economy (Boy and Girl)
A strong El Niño Phenomenon has recently been observed, which has revealed many complications in the provision of public services such as water and energy, especially in large cities. These rationings affect economic activity by limiting productivity and desired services. In addition, public services have been affected, which has increased regulated rates and inflation.
Now, if El Niño passes, it may take some time to recover the level of the reservoirs, but then comes the La Niña Phenomenon, which is important rains and can affect roads and some crops. Definitely, extreme weather events can affect prices and economic activity, which in turn would delay economic reactivation if inflation does not decrease.
How fast will inflation continue to fall?
At the beginning of May, DANE will deliver inflation information for the month of April. This will indicate how El Niño affected utility rates and whether inflation continues to ease, especially rental inflation, which began to ease slowly in March. Furthermore, as the statistical basis effects fade, inflation could continue to decline, but more slowly, towards levels close to 7%. Although this is good news, the speed with which inflation is falling also requires gradual adjustments to the Bank of the Republic’s interest rate.
Leading indicators of the second quarter and the economic boost due to Mother’s Day
After the GDP for the first quarter is known in mid-May, it is important to analyze the leading indicators to understand the direction of economic activity. Mother’s Day provides valuable information about the economic recovery in the second quarter of the year. These indicators are important to know the current state of the economy and should be followed closely.
International panorama: Effects of war, central bank decisions and global growth
On the international scene, the possible escalation of the war in the Middle East has been observed, which could affect the prices of primary goods and slow down economies. It is also important to pay attention to messages from central banks, which can influence monetary policy and the exchange rate in Colombia.
Finally, every month the economic activity in the different countries is monitored, which can show why exports in Colombia are not recovering or can help the country’s trading partners recover in a better or worse way. .
