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Manufacturing shifts into higher gear in Colombia

Staff Writer | August 2, 2018
Growth in the Colombian manufacturing sector gained momentum at the start of the third quarter.
Colombia worker
LatAm   Companies continued with their stock-building efforts
A sharp and accelerated upturn in new work supported the strongest increases in output and employment in 30 and 31 months respectively.

Companies continued with their stock-building efforts by purchasing additional inputs for use in the production process, but longer delivery times weighed on inventory accumulation.

Offering some respite to firms, input cost inflation softened in July, which in turn resulted in a weaker rise in factory gate charges.

The seasonally adjusted Davivienda Colombia Manufacturing PMI™ climbed from 53.0 in June to 53.5 in July, its highest mark in two-and-ahalf years.

The latest figure was consistent with a marked and stronger improvement in business conditions across the sector.

Out of the five subcomponents of the PMI, the upward movement was driven by new orders, employment and output.

Amid reports of strengthening demand conditions and the launch of new products, inflows of new business increased in July.

Moreover, the upturn was the sharpest in three-and-a-half years.

Consequently, factories scaled up production at the start of the third quarter.

The rise in output was marked and the quickest since January 2016.

July data pointed to an increasing degree of capacity pressure among companies as outstanding business increased to the greatest extent since January 2015.

As a result, firms hired additional staff during July.

The increase in employment was the sixth in as many months and the most marked since the end of 2015.

Manufacturers' outlays also increased on the purchasing front.

Buying levels rose at the fastest pace in 27 months.

Anecdotal evidence suggested that poor road conditions and shortages of some materials caused a further lengthening of suppliers' delivery times.

There were also reports of issues in receiving imported items.

In turn, worsening vendor performance led to a softer increase in holdings of raw materials and semi-finished items.

Stocks of finished goods also rose slightly, having declined in each of the two preceding months.

Although input costs continued to increase in July, the rate of inflation moderated.

Evidence supplied by survey participants suggested that higher prices for chemicals, metals and plastics were partly offset by successful price negotiations with vendors.

The rise in overall cost burdens was the weakest in almost four years.

Similarly, charge inflation softened.

Colombian manufacturers expect marketing efforts, new client wins, the opening of new branches and product diversification to boost production in the coming months.

However, worries surrounding low investment and the sustainability of the economic upturn weighed on optimism.

The level of positive sentiment was at a three-month low, but historically elevated.