Latam Weekly: Colombian GDP, Banxico Quarterly Report and Minutes, Global PMIs

ECONOMIC OVERVIEW

• Markets will have to wait until Friday’s global PMIs to get a fresh read on the possible economic impact of US tariffs announcements and risks, but headlines on the matter may continue to shake up trading over the course of the week. The US and Canada are closed for holidays on Monday.

• Colombia publishes Q4 GDP data (following Peru’s weekend release of GDP figures) and Mexico’s central bank releases the minutes to its latest policy decision (50bps cut) alongside an updated economic assessment in its quarterly report. Chile’s calendar is empty.

PACIFIC ALLIANCE COUNTRY UPDATES

• We assess key insights from the last week, with highlights on the main issues to watch over the coming fortnight in Mexico.

MARKET EVENTS & INDICATORS

• A comprehensive risk calendar with selected highlights for the period February 15–28 across the Pacific Alliance countries and Brazil.

Chart of the Week

ECONOMIC OVERVIEW: COLOMBIAN GDP, BANXICO QUARTERLY REPORT AND MINUTES, GLOBAL PMIS

Juan Manuel Herrera, Senior Economist
juanmanuel.herrera@scotiabank.com

• Markets will have to wait until Friday’s global PMIs to get a fresh read on the possible economic impact of US tariffs announcements and risks, but headlines on the matter may continue to shake up trading over the course of the week. The US and Canada are closed for holidays on Monday.

• Colombia publishes Q4 GDP data (following Peru’s weekend release of GDP figures) and Mexico’s central bank releases the minutes to its latest policy decision (50bps cut) alongside an updated economic assessment in its quarterly report. Chile’s calendar is empty.

A quieter week awaits—albeit with White House uncertainty continuing to hang over markets—to take a break from a busy period of major central bank decisions and key US data releases, and with US and Canadian markets closed on Monday for Presidents’/Family Day. In Latam, Mexico’s and Colombia’s calendars have the most to offer next week, with Banxico’s quarterly report and meeting minutes and Colombian Q4 GDP data on tap. Peru releases its own GDP figures over the weekend for markets to react to at the Monday open, while Chile’s calendar is bare of major events or data on schedule. Global trading may be relatively range-bound, headlines notwithstanding, until the release of global PMIs on Friday, with a small chance that the Fed’s meeting minutes out on Wednesday provide any new information while Canadian, UK, and Japanese assets await domestic CPI figures. RBA (-25bps) and RBNZ (-50bps) decisions are unlikely to surprise.

We estimate that Colombian GDP expanded by 1.7–1.9% in 2024, in data due for release on Monday. With Colombia’s statistics agency (DANE) rolling out various revisions to historical data alongside the annual GDP figures, there tends to be larger data surprises with this release than for other economic readings. In 2024, agriculture, recreation and entertainment (online gambling), and somewhat greater public outlays as spending execution normalised were the standout sectors. Nevertheless, the latter part of the year saw greater momentum in household consumption. We project GDP growth of 2.6% in 2025 to be more broad-based across sectors, while from an expenditure standpoint, we expect continued strengthening in private spending in contrast to a feeble recovery in investment.

The following day, we get the results to the latest BanRep survey of economists, where expectations for inflation and policy rates are in focus. As we’ve repeatedly highlighted, the massive 9.5% minimum wage increase in January has significantly reshaped expectations for price growth and, in turn, the degree of policy easing that BanRep would be able to roll out this year. Our team’s own forecasts for inflation at end-2025 have gone from 3.9% two months ago (prior to the minimum wage decision to 4.5% currently. Alongside this change, we now expect that BanRep’s rate will close the year at 6.75%—a 1ppt decrease from a 7.75% projection in mid-December. In the January edition of BanRep’s economists survey, inflation forecasts averaged 4.21% and policy rate forecasts averaged 6.93%.

After Colombia’s calendar is in focus in Latam on Monday and Tuesday, Mexico’s takes over for the balance of the week with the release of Banxico’s quarterly report on Wednesday; retail sales, Banxico’s meeting minutes, and the Citibanamex survey on Thursday; and Q4 GDP revisions on Friday. Banxico’s quarterly report and meeting minutes are likely to build the Board’s case that favours the possibility of additional 50bps rate cuts as highly underwhelming economic momentum is weighed against lingering upside inflationary risks. Markets are leaning in that direction too, pricing in 40bps in cuts for the next rate decision in late-March; we’ll see then whether the US’s tariffs pause has been extended, which would make Banxico’s 50bps choice an easier one.

Retail sales data for December will likely reflect ongoing consumer weakness, to show a seventh consecutive year-on-year decline, and headwinds to remittances from US immigration policy are liable to further depress domestic household spending—already the 4.9% y/y decline in international remittances in December was the biggest since 2013 though, to be fair, it came after a 10.6% y/y rise in November (best since June, maybe some frontrunning of Trump risks ahead of the holidays?).

From Peru, we get December/Q4 GDP data on Saturday (the 15^th), which our team covered in last week’s weekly (see here). In a nutshell, Peru’s economy is estimated to have expanded by over 4% y/y in the final month of the year to round out 2024 annual growth to a strong 3.2/3% after a 0.4% contraction in 2024 owing to drags from El Niño and political rollercoasters. On the 21^st, Peru’s INEI will publish an expenditure breakdown of Q4 GDP figures to give us a better understanding of the engines of growth heading into 2025.

Global markets will again be trading at the whim of trade headlines/threats in the lead-up to the release of Global S&P PMIs on Friday that will be monitored for hints on the economic hit of trade uncertainty. The Fed’s meeting minutes on Wednesday are also worth a look, but may merely reinforce the Fed’s hawkish stance amid solid growth and upside inflation risks. Local assets in Canada, the UK, and Japan will be influenced by the countries’ respective CPI releases (Tuesday, Wednesday, and Friday, respectively), while antipodean markets will have the RBA’s and the RBNZ’s rate decisions that are expected to deliver a 25bps cut on Tuesday and 50bps on Wednesday, respectively. 

Mexico—Q4 GDP to Be Revised Lower; Watch Banxico Minutes

Rodolfo Mitchell, Director of Economic and Sectoral Analysis
+52.55.3977.4556 (Mexico)
mitchell.cervera@scotiabank.com.mx

Miguel Saldaña, Economist
+52.55.5123.1718 (Mexico)
msaldanab@scotiabank.com.mx

Next week, final GDP data for Q4-24 will be released, which we anticipate will be lower than the figure published a couple of weeks ago. This is due to the decline in industrial production in December, which recorded an annual decrease of -2.7%, higher than the anticipated decline of -1.7% implied in the preliminary Q4-24 GDP data. In this regard, it is very likely that the estimated annual GDP growth for the fourth quarter of 2024, which was 0.6%, will be revised downwards.

Additionally, the minutes of the February 6^th monetary policy meeting will be published, in which Banxico decided to increase the size of cuts to 50bps from 25bps. This decision was justified by arguing that monetary policy was entering a new stage where such a restrictive stance was not necessary, opening the door to at least another cut of the same magnitude at the end of March. It will be of utmost importance to analyze the arguments of the Board members, especially those of Deputy Governor Heath, who voted for a 25bps cut.

Furthermore, retail sales and the GDP proxy, the IGAE, both for December, will be published. However, these data are less relevant since we will know the final GDP figure for the fourth quarter of 2024.