Economic activity in July achieved its second strongest rebound of the year

This Wednesday, September 18, the Dane presented the results of the Economic Monitoring Index (ISE) for the month of July, which showed that the collapse of last month has been overcome for now and that for the first time in the entire year all activities economic growth remained in positive territory, thus achieving the second most notable growth of 2024.

The accounts of the statistical authority reported that the annual variation for the ISE in the seventh month of the year was 3.7%, a figure that marks an advance of 3.5 percentage points compared to the same period in 2023 and leaves behind the collapse that was seen in June, when the economy marked a variation of -1% and The ghost of a slowdown has once again gained strength among analysts and research centres.

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“For the preliminary month of July 2024, the ISE in its original series stood at 124.81, which represented a growth of 3.68% compared to the month of July 2023 (120.38),” said the Dane in its report, in which it also said that with regard to the series adjusted for seasonal and calendar effects, the indicator “stood at 123.43, which represented an annual growth of 3.86% in July.

Agro continues to push

One of the first conclusions that the ISE data for July leaves is that agricultural activities and the public sector remain the main drivers of the economy, although industry, trade and construction once again contributed to growth, albeit at low levels.

As regards agriculture, Dane reported that the annual variation was 7.5%, a figure that leaves behind the -0.6% drop seen in June and marks a growth of 4.8 percentage points compared to July 2023. Looking at the results of the current year, this balance for the seventh month was the second highest, being surpassed only by the 11% of April.

On the other hand, although tertiary activities grew by a modest 3.3% Compared to last year, there are three lines within this indicator that should be reviewed carefully, since they showed notable progress. The first of these is public services, which showed an annual variation of 2.3%.

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Secondly, financial activities, which, in response to the drop in interest rates, increased by 2.6% compared to last year, followed by real estate activities, which achieved a variation of 1.8% in their annual accumulation, being one of the few fronts that have been making good progress for several months, despite the effects of the slowdown.

That said, it should be noted that the line that obtained the strongest variation, Even surpassing agriculture, it was public administration and defense (which sets the pace of the State and its support for the economy) that rebounded by 7.7% in July, thus overcoming the fall of last month (-2.1%) and recovering the good pace of the whole of 2024. However, compared to the same period in 2023, it must be said that a decline of one percentage point remains on the table.

Colombian economy.

Bloomberg

Industry and commerce

Another of the data that should be highlighted in the balance sheet presented by the statistical authority is concentrated in industry and commerce, which on the one hand reversed the negative trend and on the other maintained the progress observed last month, giving a new respite to the market and to the confidence of investors.

In the case of secondary activities, which include industry and construction, the DANE stated that their annual variation was 1.5%. This result translates into a strong growth compared to the -7% of last year and ends the bad streak. which was seen during May and June 2024, when it had fallen -1.9% and -3.6% respectively.

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Likewise, as regards trade, its 12-month balance was 0.7% and thus rises compared to -5.6% in July 2023 and continues to contribute to the growth of the economy. In this list it should also be noted that information and communications (0.6%) and professional and scientific activities (0.2%) were two other sectors that also presented positive figures compared to the ISE.

Grow more

While this balance can be interpreted as good and marks what for many It is the beginning of the recovery, analysts maintain that it is necessary to grow more to completely overcome the ghost of the slowdown and return to the dynamic that existed before the pandemic, also protecting fronts such as the labor market and the generation of quality jobs, to overcome poverty.

Trade contributed 3.7 points to the ISE variation.

THE TIME file

Diego Montañez-Herrera, an analyst who was part of the IDB’s advisory team, said that if we look at the overall balance of what was achieved between January and July, growth figures are still low and several areas still require the implementation of a reactivation plan.

“Although the ISE grew by 3.7% in July, when comparing the first seven months of 2024 with the same period in 2023, the growth is only 1.89%. In addition, some sectors are still lagging: Industry, construction with -1.7%; “ICT with -1.6%; the financial sector with -0.3% and trade with -0.1%,” said this expert.

Meanwhile, for Jackeline Piraján, an economist at Scotiabank Colpatria, these results confirm that Colombia is growing below its potential, which could once again put on the table the possibility that the Bank of the Republic will cut interest rates more quickly and allow the economy to breathe a little more.

“Despite the positive surprise, at Scotiabank Colpatria we believe that The Bank of the Republic has arguments to consider a stronger cut in its interest rates, because although these data were a positive surprise, they are explained by temporary effects and by specific sectors that do not cover general economic activity,” he said.

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Finally, Daniel Velandia, managing director and chief economist of Research at Credicorp Capital, argued that all the conditions are currently in place for the country to recover at a better pace than it has seen. However, he warned that this will depend on the will of the monetary authorities and on whether the right decisions are made regarding reactivation.

“We maintain the growth projection at 1.8% for this year, but with an upward bias, awaiting more information and the behavior of the sectors that have been very volatile that I mentioned. On the other hand, it is to be expected that private consumption, on the demand side, will continue to lead the economy as inflation and interest rates continue to decline and that This will allow this cyclical recovery to continue in the coming quarters,” said Velandia.