Colombia’s retail sales rose by 13.4% year on year in March. This was above the forecast of 10.1%.
The released figure exceeded expectations by 3.3 percentage points. The data point compares March with the same month a year earlier.
The strong March retail sales data, coming in at 13.4% year-over-year, shows that consumer spending is much healthier than we anticipated. This rebound from the slower growth we saw throughout most of 2025 suggests underlying economic strength. Consequently, we believe the central bank, Banco de la República, will be less inclined to cut interest rates at its upcoming meetings.
Market pricing has been leaning towards further rate cuts this year, a view now being seriously challenged by this robust data. We are seeing value in paying fixed on Colombian IBR swaps, as expectations for monetary easing will likely be pushed further out into late 2026. With the latest April inflation data recently printing at 5.8%, well above the central bank’s target range, the case for holding the policy rate at its current 7.5% for longer is strengthening.
A more hawkish central bank outlook should provide significant support for the Colombian Peso. We are looking at derivatives that benefit from a move lower in the USD/COP exchange rate, which is currently hovering around 3,950. Remembering the significant volatility and depreciation the peso experienced in early 2025, buying low-cost call options on the currency could be an effective way to position for renewed strength.
This consumer strength is also a direct positive for Colombian equities, especially in the retail and financial sectors. We see an opportunity in buying call options on the MSCI Colcap index, which has already gained over 8% this year. The retail sales data suggests corporate earnings could surprise to the upside, providing further fuel for the domestic stock market.
