The factors that do not let inflation in Colombia slow down in 2023 – Sectors – Economy

Although June presented good news to Colombians in terms of the cost of living, by continuing to drop and completing three consecutive months of decline to stand at over 12.13 percent per year, its variation is still maintained at 2.5 percentage points per above last year’s record (9.67 percent) and 9.13 points further from the Banco de la República goal. AND Although there are factors that are already beginning to push the variation in the cost of living of Colombians down with greater force, there are also other market forces that prevent this decrease from occurring as quickly as possible. that the country needs.

(Also read: Inflation continued to drop in June, but remains above 12% per year)

These factors have prevented Colombia from inflation, which was so high last year in the world, goes down as it has done in other countries. For example, in Brazil the peak of the inflationary wave was already reached a year ago, when it reached 11.9 percent, but by May it had already dropped by two thirds, to only 3.9 percent.

In all the countries of the Organization for Economic Cooperation and Development (OECD), to which Colombia belongs, the inflation peak of 10.7 percent occurred since October of last yearand for May the increases were already reduced by more than a third, to 6.5 percent.

In Colombia, prices continued to accelerate until March of this year, for a late peak in relation to the other countries.from 13.5 percent in May, and in June the fall is only less than one tenth, to 12.1 percent.

According to the data delivered last night by the National Administrative Department of Statistics (Dane), food no longer exerts the same pressure as previous months, now that force has moved to the so-called baskets of services and regulated items, where fuels presented the greatest upward pressure, followed by electricity and transport.

In the services part, the greatest pressures come from the rental side and meals at table service establishments and prepared outside the home.

Fuels explain a third of the inflation in June, since from 0.3 percent inflation in the sixth month of 2023, they contributed 0.13 percentage points. These, in addition, became more expensive 4.6 percent only in that month, which is equivalent to 71.5 percent annually and since September 2022 they have risen 32 percent.

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“It is important to mention that the El Niño phenomenon will be present and could generate upward pressures in divisions such as food or services such as water, Therefore, special attention should be paid to the behavior of these divisions in the remainder of the year,” warns the Anif economic studies center, compared to the data revealed by the national statistical entity.

The cost of electricity contributed 0.01 percentage points, as a consequence of its rise of 0.5 percent in the month, which is equivalent to an annual rate of 6.2 percent.

The weight of the rent

Another of the items that maintains its pressure on the cost of living of Colombians this year are rents, which have been rising and will continue to do so in the remainder of 2023.

The imputed and effective lease items contributed 0.08 and 0.07 percentage points to June inflation, respectively, and both rose 0.6 percent in the same month.

Despite the above, Mario Ramírez, president of Fedelonjas, points out that the increase in rental fees has not yet reached its maximum allowable this year of 13.12 percent.

(Continue reading: With productivity, Alpina dodges inflationary blow)

For Grupo Bancolombia analysts, the regulated basket is the one that ends the year with the highest inflation, as a result of the persistent impact of indexation, the effects of El Niño on electricity rates and the adjustment of fuel prices, which as a whole would lead this segment to close the year with an annual inflation rate close to 15.3 percent.

And they also say that, in particular, the persistence of the indexation on the rate of services, especially in rentals, will lead this basket to close the year at around 8.4 percent.

Meals away from home and home

The theme of services also set its tone in the sixth month of the year. Indeed, 0.03 percentage points were contributed by meals in table service and self-service establishments (restaurants), means of transportation, vending machines, mobile stands, and places of recreation. Meals contracted to order, to go and at home will also contribute, which rose 0.5 percent in said month.

Some 0.02 percentage points came from meals prepared outside the home for immediate consumption, in table service and self-service establishments, mobile stands, entertainment venues, take-away and home delivery, which increased in month 1 per hundred.

Lastly, poultry meat rose 0.02 percentage points, rising 0.73 percent in June, that is, an equivalent rate of 9.1 percent per year.

The expected

With this panorama, the consensus of market analysts indicates that inflation will continue to consolidate its decline in the remainder of the year, without this not implying that in some month of the second semester there may be some slight upward variation depending on the intensity of the El Niño phenomenon or the impact of other factors.

However, everything indicates that for the entire year inflation may be hovering between 9 and 9.5 percent.

“At BBVA Research we expect core inflation to reach its maximum, while food inflation will continue to moderate, with which total inflation will maintain a downward path in the second half of 2023,” said Laura Peña, an economist at BBVA Research when learning the Dane data for June.

In the Bancolombia Group, the economists consider that, based on the results of the sixth month of 2023, total inflation ended the year at 9 percent. And they add that this result and its inflationary perspective “reaffirm our expectation that the Banco de la República will choose to keep the interest rate stable in the decision that will be made at the end of July.”