Davivienda Colombia Manufacturing PMI Production Index at 48.5

(Bloomberg) -- Colombia's manufacturing industry production index fell below the 50.0 growth threshold in January for the first time in 11 months. The overall manufacturing gauge dipped to 47, the lowest level in 18 months as Colombia's manufacturing sector came to a standstill.

“The results for the manufacturing sector in January were not good. The five components of the PMI showed deterioration, although moderate. A lot of attention should be placed to what happened with production which, after decelerating for four months, had a negative and relatively high drop in January. New orders and employment also showed reductions,” said Andrés Langebaek Rueda, Chief Economist Bolivar Group at Davivienda.

The five-point drop in the output index was the sharpest on record, which started in the spring of 2011. On a not seasonally adjusted basis, the January index was the lowest in six years. Survey participants noted that the contraction is linked “to weak underlying demand and unsold stocks at clients.”

Lower output needs at Colombian goods producers resulted in further job shedding -- the employment index fell for the third consecutive month. Firms reportedly are not replacing voluntary job leavers.

On top of shedding jobs, “cutbacks to expenses were also evidenced by back-to-back declines in quantities of purchases. Furthermore, the decrease was the most marked in one year,” according to the report. “Anecdotal evidence highlighted cash flow difficulties and falling production as the key reasons leading them to scale back input buying.”

Weak demand coupled with sufficient stock levels curtailed new orders, which fell to 47.2.

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