In May, inflation is expected to finally reach its peak and begin to moderate hand in hand with a gradual slowdown in the economy, which can be seen in the data for the first quarter and in the behavior of trade on Mother’s Day.
This, added to the behavior of the exchange rate against the US dollar and the decisions of central banks in the world, will be the events analyzed by the Scotiabank Colpatria team of economists in the five economic topics of the month.
Economic results first quarter of 2023
On May 15, the National Administrative Department of Statistics (DANE) will announce the result of the Gross Domestic Product (GDP) for the first quarter of 2023. It is expected that the Colombian economy has entered a period of gradual deceleration, led by due to a slowdown in household consumption.
This is due to the fact that high inflation, plus the interest rates that have been rising to control inflation, make the significant dynamism that household consumption had last year decrease significantly.
This suggests that the Colombian economy will be growing less than last year and that for all of 2023 it will reach 1.5% on average.
For the first quarter of the year, the leading results, that is: manufacturing and retail sales, evidenced the slowdown as well as other indicators such as energy demand, home sales and vehicle registrations, showing that households are consuming less and less.
It is expected that this not only helps inflation to fall, but also contributes to reducing the external imbalance, due to very large imports that are expected to begin to decline.
Will inflation finally come down?
Inflation finally showed some deceleration, although continuing well above the inflation target, above 12%.
Additionally, a strengthening of the peso against the dollar can help stop the prices of imported goods from rising, which will help to reduce inflation.
Of course, there are still many uncertainties, such as the winter season that has caused the roads to be affected and the supply of products, especially in the big cities, to be diminished.
That could play a trick and show inflation a little higher than expected; however, there is an expectation that inflation will begin to slow down slowly, to end the year around 9%.
Mother’s Day, with a slowdown in the economy?
The publication of the data for the first quarter of the year is very useful; however, it does not fully say how the economy is doing right now.
In May you need to know if the slowdown continues, which is why such important dates for commerce, such as Mother’s Day, are relevant because they show how the economy is doing on a day-to-day basis.
Possibly it will happen that, as in Easter, retail sales and purchases will show a significant decrease, assuming that household consumption is slowing down. This is also going to be very relevant for job creation in the retail trade sector, which normally generates some temporary jobs on this date.
Dollar, will it continue to fall? What will it depend on?
The exchange rate in Colombia has shown an unusual strengthening, it has appreciated almost $600 until April, this because the United States dollar has weakened significantly compared to most economies or currencies in the world.
It also occurs because in April there was a significant payment of taxes from large taxpayers, causing a large part of the companies to monetize a significant amount of dollars in the economy, expanding the offer and helping the appreciation of the exchange rate.
If the US dollar does not definitely strengthen, because the Central Bank of that country does not raise its interest rates and the economy continues to slow down, the exchange rate in Colombia would have more room to strengthen; however, it continues to depend a lot on how the world perceives the slowdown in the US economy and whether or not its interest rates increase.
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