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Why Colombian Consumer Confidence Improved in June 2017

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Consumer confidence in Colombia

The business confidence in Colombia (GXG) in June 2017 remained in negative territory but recovered from lows in the last five months. The Colombian consumer sentiment improved to -11.7% in June 2017 from -16.9% in the previous month. The business sentiment regarding the current economic situation as well as future expectations improved in June 2017 as compared to the previous month. Let’s look at the business confidence over the last year in the below chart.

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Consumer confidence in June 2017

The Colombian (EEM) Confidence Index rose in June 2017 from May 2017 as households were less pessimistic regarding current economic conditions and future expectations. The consumer confidence increased in four out of five cities.

The Consumer Expectations Index (IEC) recorded a balance of -11.7% in June 2017, representing an increase of five percentage points from the previous month and a slight decline of 0.4 percentage points compared to June 2016. The Economic Conditions Index (or ICE) stood at -13% in June, a 10.6 percentage point improvement over May 2017 in economic conditions.

The improvement in consumer confidence in June 2017 from the previous month is mainly due to the better perception of the economic situation domestically. However, it continues to be in the negative territory in 2017. The responses related to home valuations and willingness to buy housing remained positive in 2Q17 and slightly higher than 1Q17 levels. Meanwhile, willingness to buy durable goods also showed significant improvement in June 2017 over the previous month but remained in negative territory.

Political stability and reforms

The increased political stability with the implementation of a peace agreement in Colombia (ICOL) has improved its consumer sentiment over the last few months. The insurgence of the Revolutionary Armed Forces of Colombia (or FARC) and similar groups for more than a decade had impacted economic activity in Colombia. In spite of the peace deal, the consumer confidence remains in negative territory due to concerns related to tax reforms, which raised the value-added tax from 16% to 19%, continue to impact the consumer confidence in 2017.

The improved consumer confidence is expected to benefit some sectors including banks (CIB), manufacturing (DOLE), and the auto sector (GM) in Colombia.

Let’s look at the business confidence in Colombia in our next article.

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