Colombia | August inflation disappoints: reduces, but with demand and supply pressures

Summary

In August, monthly inflation was 0.70% and annual inflation was 11.43%, above the average expectations of market analysts, who, according to the Banco de la República survey, expected a monthly variation of 0.44%.

Key points

• Key points:
• Food inflation once again surprised on the upside. Although the figure fell in annual terms, it did so to a lesser extent than expected by the average of analysts. The surprise came mainly from the perishable sub-basket, which has been registering increases in the annual variation since June.
• Annual non-food inflation was 11.19%, 25 bps lower than in July. Internally, all baskets decreased compared to the previous month's figure in annual terms in August. Although base effects facilitated the decreases registered, demand pressures are still perceived.
• Within non-food inflation, the basket of goods showed the largest decreases compared to the previous month, still with pressures from products such as beer, soft drinks and cleaning and maintenance products; the second largest decrease was in the administered prices basket, which still maintains pressures from subclasses such as fuels and utilities. Finally, the services basket registered pressures from rents and meals in establishments outside the home.
• BBVA Research expects inflation to maintain its downward trend, although volatility in food inflation may moderate the expected reductions, particularly in view of expectations of the effects of the El Niño phenomenon towards the end of the year. Core inflation, on the other hand, will decline moderately in annual terms in the coming months, although there may be upside risks if consumption is more resilient.

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