Retail sales and manufacturing surprised to the upside in January. In annual terms, retail sales increased 10.2% yoy in January (+8.0% in the previous month), well above both the Bloomberg market consensus and our forecast of 6.8%. Core retail sales (excluding fuels and vehicles), increased 2.0% from December (mom/sa), leading to a 10.7% yoy increase (+7.0% yoy in December). Retail sales were boosted by computers and telecommunications equipment, vehicles and motorcycles. Meanwhile, manufacturing increased by 0.7% mom/SA, leading to a 1.9% yoy expansion (+1.9% yoy in December), higher than the Bloomberg market consensus of +1.5%, and our +1.0% call. Manufacturing was boosted by personal care products, electrical equipment and beverages. The data puts an upside bias to our estimate for the monthly activity indicator (+2.2% yoy expansion, to be published on Tuesday 18).
Activity is accelerating at the margin. During the quarter ending January, manufacturing increased 0.8% YoY (+0.6% in 4Q24). At the margin, manufacturing increased 6.9% qoq/saar, up from 4.7% in 4Q24 and -1.4% in 3Q24. During the quarter ending January, retail sales increased 9.4% yoy (+9.0% in 4Q24), while core retail sales rose by 8.5% (+7.1% in 4Q24). Sequentially, core retail sales increased 19.2% qoq/saar (from +16.7% in 4Q24 and +8.2% in 3Q24).
Our take: Activity data confirms the recovery of domestic demand amid a large real salary adjustment and falling interest rates. We expect the economy to grow 2.3% this year (above from the 1.7% in 2024). While we believe it to be astute for BanRep to keep rates on hold later this month, the new composition of the Board swings the odds in favor of resuming the cutting cycle.
Vittorio Peretti
Carolina Monzón
Juan Robayo
Angela Gonzalez