Colombian consumer price inflation in 2009 was likely the lowest the country has seen since the mid-1950s due to weak demand, a slump in food prices and a stronger peso.
A Dow Jones survey of nine analysts produced a median forecast of a 2.02% rise in the Consumer Price Index in 2009, down from 7.67% in 2008 and below the central bank’s 2009 target of 4.5%-5.5%.
Colombian inflation hasn’t been that low since 1955, when consumer prices rose 2.03%.
Consumer prices in December probably rose just 0.11%, despite Christmas holiday spending, according to the survey in which forecasts ranged from 0.02% to 0.18%. Consumer prices rose 0.44% in December last year and slipped 0.07% in November of this year.
Any increase in prices, however small, will end the period of deflation registered between September and November. Higher fuel prices spreading to other products likely caused a resumption of overall increases, said Ricardo Perez, a market analyst with local brokerage Alianza Valores.
The low inflation figures are partly traceable to a slump in exports to Venezuela, which caused a glut of fruit, meat and other foodstuffs as Colombian producers tried to offload surplus products on the domestic market.
Food prices fell 0.21% in December, led by a 3.43% fall in the price of vegetables, a 1.75% fall in cereals prices and a 1.26% fall in fruit prices, the Ministry of Agriculture said Monday.
Food prices make up 28% of Colombia’s consumer price index.
“The economy is still rather weak, and the Venezuela situation is still affecting prices,” said Pedro Tuesta, Latin America analyst with New York-based consultancy 4Cast.
“Normally, you have a bit more inflation in December, but this time the economy remains very weak and they haven’t been able to push up prices,” he added.
German Verdugo, an analyst with local brokerage Correval, said the dispute with Venezuela, coupled with soft demand and a stronger Colombian peso, were keeping inflation at bay.
Colombian exports to Venezuela fell 70% in October compared to the same month in 2008, after Venezuelan President Hugo Chavez said his country would substitute Colombian imports with products from other countries.
Inflation could start to rise again in early 2010 as the economy recovers, and if low rainfall due to the weather phenomenon El Nino damages crops, Verdugo added.
Colombia’s national statistics agency, or DANE, is scheduled to release December and 2009 inflation data on Tuesday around 7 p.m. EST. (Matthew Bristow and Inti Landauro / Dow Jones)