Academic literature on the topic 'Consumer packaged goods industry'

The volatility in a CPG market is modeled using a bottom-up simulation approach and validated against disaggregated supermarket transactions data. The simulation uses independent agents, each agent representing unique households in the data. A simple behavioral model incorporates household preferences for product attributes and prices. Our validation strategy tests the model predictions at both macro and micro levels and benchmarks the performance in each against a random choice model. The model significantly outperforms the benchmark at both levels. At the macro level, choices made by heterogenous agents accurately captures the volatility in market shares over time. This accuracy at the macro level is driven by the accuracy of predictions at the micro household level SKU and attribute choice.

Current conventional plastic is favored due to its affordable price and desirable properties however the major drawback is its non biodegradable properties which lead to environmental pollution. Taking into consideration the issues of non renewable resources, there is where bioplastic were introduce. According to European bioplastic, bioplastic is defined as material produced from biobased, biodegradable or both properties. Bioplastic is coming from renewable resources which can be used to reduce the plastic waste problem. Recently, the existence of bioplastic became one of the promising technologies in various industries especially in packaging industry. This review paper is highlight include the bioplastic packaging application (food and beverages, healthcare, cosmetic and personal care and consumer packaged goods) in industry for 4 types of bioplastic (PLA, PCL, Starch based and PHAs).

Purpose – The purpose of this paper is to offer a state of the art description of open air markets (OAM), a little-known phenomenon that is indispensable in Africa’s consumer packaged goods industry. Design/methodology/approach – A qualitative methodology comprising in-depth semi-structured interviews and direct observation was employed. Findings – Analysis of data from Nigeria, Africa’s largest economy and most populous country, reveals that channel members have roles that are different from that of their Western counterparts. For example, distributors often do not distribute and principals are expected to actively sell on behalf of their distributors to empty the latter’s warehouse. Also, while many end-users in developing countries expect credit sales and opportunity to bargain, extant literature does not include these demands in the formal list of service output demands. Another major finding is the surprising order underlying OAM. It is the bedrock of commercial activities: for most consumer packaged goods manufacturers, sales through OAM account for over 90 percent of revenue. Research limitations/implications – The focus on one industry and country limits the generalizability of the above findings. Practical implications – Africa is the next growth frontier. Tapping into this growth requires a deep understanding and appreciation of the important role played by its unique marketing channels. Originality/value – Given the dearth of documented knowledge about marketing channels in emerging markets, this study addresses an important gap. Its findings could inform theory development and encourage more research on marketing channels in developing countries.

Purpose The distribution channel in Indian Consumer Packaged Goods (CPG) ecosystem is both unique and unparalleled in terms of its reach, structure, and size. This paper aims to give an emerging market perspective of the innovations in the distribution models of CPG industry through pertinent case studies. Design/methodology/approach This briefing is prepared by two independent writers who have critically evaluated the Indian CPG Distribution ecosystem and contextualized the case-studies with their perspectives. Findings Most of the text-books and academic literature are tailor-made for the distribution through organized retail. So, how do we tackle the complexities of the Distribution in an emerging market like India with a gargantuan proportion of sales in the unorganized retail sector? The paper is possibly the first attempt to give an emerging market perspective of the successful innovations in the distribution models of CPG industry through pertinent case studies and thereby serve as a learner’s primer in this area. Practical implications The paper provides impactful strategic insights and practical thinking derived from the innovative approaches of successful corporations. Originality/value The research paper is first of its kind documentation of innovation in CPG ecosystem of India and thus saves busy executives and researchers hours of reading time. The relevant information is presented in a succinct and easy to digest no-frills format.

The purpose of this paper is to investigate the problems of the sustainable development, to explore the level of innovation in the fast moving consumer goods (FMCG) manufacturing SMMEs sectors, which most affects on the state of the environment, to identify the causes of low innovation in the industry and to examine these factors influence on the effectiveness of SMMEs manufacturers innovation strategies, as well as to invent a new innovation strategic approach to overcome innovation problems in the economic growth of fast moving consumer goods SMMEs manufacturers. The study is aimed to determine the level of innovation and factors contributing to low innovation in fast moving consumer goods (FMCG) SMMEs manufacturers, which hinder their economic performance. Mixed approach of quantitative and qualitative questionnaire is used for primary data collection. Sample consists of 120 SMMEs. Statistical Package for Social Sciences (SPSS) (23.0) was employed for data analysis. The study results are presented with figures and diagrams. This study will be a useful tool for general public and relevant stakeholders in this sector.

The development of the 4th Industrial revolution has brought many changes in technologies that are set to change the business world. In Vietnam, retailers of consumer products have taken the advantage of the innovation to engage in digital marketing. The aim of this study is therefore to evaluate the significance of digital marketing in consumer goods retailing. The hypothesis developed for the research is that there is a certain link between digital marketing and consumer goods industry. To achieve its aim, the study uses quantitative research methodologies where data is collected through online questionnaires. A purposive sample of 580 respondents was used to obtain data. The information gathered was analyzed using Excel and SPSS packages.
 The study finds that most respondents knew about online sale of consumer goods through advertising ads on the web. The paper then draws a correlation between knowledge of marketing and the actual buying of goods. It is further established that majority of participants prefer buying goods online because it is convenient and cost-effective. The role of digital marketing in consumer goods retailing is explicitly outlined and linked to research hypothesis. By so doing, the study is said to have met its objective.

A leading factor in the creation of avoidable household food waste is confusion about food date labels. In the United States, date labels are largely unregulated, resulting in a plethora of date label phrases used in commerce. Federal regulation has been proposed but never passed, while both industry and government have provided voluntary guidance on preferred label phrases. We study food producer adherence to the label phrases endorsed by the Trading Partner Alliance (TPA, an industry group), which includes “Use By” for perishable products subject to a material degradation of critical performance or potential food safety concern and “Best If Used By” for all other packaged foods. Based on three studies conducted between the fall of 2018 and the summer of 2019 that use two distinct measurement methodologies, we find adherence to be less than 50% and to differ by product category, retailer, region, and brand type (store versus national brands). We find numerous dry goods and other foods that are better suited to the “Best If Used By” phrase instead feature the “Use By” phrase. This misapplication of phrases to products and the low TPA phrase adherence rate suggests that practices as of the summer of 2019 may still contribute to consumer confusion about date labels and to inadvertent food discard. We explore possible reasons why our estimated adherence rate is lower than industry reported figures and discuss tradeoffs between government regulation and industry self-regulation.

Thesis: Ph. D. in Engineering Systems, Massachusetts Institute of Technology, School of Engineering, Institute for Data, Systems, and Society, 2015.<br>This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections.<br>Cataloged from student-submitted PDF version of thesis.<br>Includes bibliographical references (pages 165-169).<br>The cost of waste for products such as soft drinks, shelf stable dry food, and dairy in the consumer packaged goods industry is massive, about $15 billion annually in the U.S.A. This thesis focuses on waste associated with product expiration since this type of waste involves both manufacturers and retailers as well as different functional areas such as production, warehousing, sales, procurement, and store operations. As a result, the industry has not made much progress in reducing this type of waste. We study three problems related to product expiration. Chapter 2 presents a descriptive study examining the root causes of product expiration and their impact on expiration. Using econometrics and our collaborator's data, we find that the amount of expiration can be reduced considerably via a case size reduction. We identify the next important opportunities in the areas of inventory aging in the manufacturer's supply chain and sales incentives, and thus the remainder of this thesis focuses on these two areas. Chapter 3 examines the manufacturer's sell-or-dispose decision for aged inventory. We develop an optimization model to find the minimum remaining shelf life below which the manufacturer does not sell the product since the cost of expiration is more than the sunk cost of production. We use machine learning to approximate optimum values which can be used as a low cost alternative method. If supply chain managers are held accountable for the cost of disposed items, they will have an incentive to better manage inventory. As a result, expiration will be reduced. Chapter 4 analyses sales-force compensation schemes from the perspective of product expiration caused by overselling. We develop a game theoretic model of the decision process of the manufacturer and the sales representative. We find a compensation scheme that aligns the interests of the manufacturer and the sales representative preventing overselling while achieving full profit potential for the manufacturer.<br>by Arzum Akkas.<br>Ph. D. in Engineering Systems

Thesis (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management; and, (S.M.)--Massachusetts Institute of Technology, Engineering Systems Division; in conjunction with the Leaders for Global Operations Program at MIT, 2010.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (p. 104-106).<br>As a consumer packaged goods company, "Company X" manufactures products "make-to-stock"; therefore, having reliable demand forecasts is fundamental for successful planning and execution. Not isolated to "Company X" or to the CPG industry, current global economic conditions have forced companies to seek increased cash flows as a method for weathering this financially difficult period. As a result, many organizations are pursuing improvements in demand forecasting and planning methodologies as a precursor to inventory optimization and to further liquidity positions. This thesis attempts to improve forecasting and planning processes by developing a framework that focuses on four general components identified as key for success by experts and practitioners. In addition, this thesis explores these components while utilizing "Company X" as the case study for improvement. The four forecasting and planning components explored at "Company X" include Data Treatment, Forecast Models, Planning Process, and Organizational Behavior. In the Data Treatment section, we present implications of data aggregation in forecasting and planning activities, as well as provide a methodology to segment SKU's for prioritization during forecasting and planning. While in the Forecast Models section, we explore various forecasting models applied during different stages of the product lifecycle, and utilize these models under "least error" selection with sales data at different levels of aggregation to determine which combination results in the most accurate forecast. Moreover, in the Planning Process section, we explore the Sales and Operations Planning methodology, and provide a set of best practices to design a planning process that meets the requirements of "Company X". Lastly, in the Organizational Behavior section, we depict the "Company X's" planning process and organization, and highlight some of the behaviors typically observed during forecasting and planning activities. Although most of the proposed components provided forecasting and planning improvements over the legacy method, not all of these were implemented at "Company X". Nevertheless, the implemented improvements provided a forecast error reduction from 17% to 10% over the life of the project. However, these improvements were not equal for all SKU segments, as B segment SKU's, or medium criticality products, benefited the most from the execution of this project.<br>by Daniel Antonio Uriarte.<br>S.M.<br>M.B.A.

Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Civil and Environmental Engineering, 2006.<br>Includes bibliographical references (leaves 61-63).<br>This thesis examines how simple weekly demand planning process can improve inventory levels and customers service levels at the Gillette Company. The processes designed by the project team has been tested and executed in a real production environment. The weekly forecast volumes generated by the demand planning team were successfully deployed by the manufacturing plant throughout the course of the project. By successfully executing this simple demand planning process, the project was able to shorten factory firm periods, eliminate the supply warehouse, and de-link demand plan to trade-flow commitments to improve overall supply chain performance.<br>by Myung-Hyun Elisa Rah.<br>S.M.

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2013.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (p. 55-56).<br>Reducing or increasing labor force is not always effective when done without a thorough analysis. Organizations could face negative consequences such us unbalanced workload, inefficient procedures, lost sales, and negative work atmosphere. An increasing number of organizations are centralizing operations in order to optimize labor costs. However, not all companies assess the new number of employees required after centralization takes place, and for those companies that actually do this analysis, there are not quantitative tools, as far as we know in the literature, that can help them estimate the workforce required. This thesis project provides practitioners with a new mathematical model to estimate an appropriate number of production planners required for the supply chain planning department of a company in the consumer packaged goods industry. Using bivariate correlation and multiple regression analysis, we explored whether a relationship exists between the required number of production planners in the new centralized offices of the Company and 13 factors that impact employee's workload. The resulting regression model accounts for 98% of the variance of the number of planners.<br>by Aura C. Castillo and Ethem Ucev.<br>M.Eng.in Logistics

Thesis (S.M.)--Massachusetts Institute of Technology, Sloan School of Management, 2002.<br>Includes bibliographical references (leaves 84-87).<br>The Consumer Packaged Goods (CPG) industry has existed for decades with a high household penetration. Individual firms started out as small family owned businesses and then gradually became more "industrialized" via acquisitions. Historically, a low capital cost of entry, as well as high geographic dispersion encouraged fragmentation of competition. Overcapacity encouraged product proliferation; relatively low profitability produced little innovation, reducing the overall loyalty of consumers to CPG products today. Consumer habits changed quickly with the introduction of new offerings, further pressuring CPG manufacturers. A key CPG issue today is how to reduce cost base and overcapacity to enable investment in innovation, and branding. Cost reduction is expected from simplification (SKU's, products, lines etc), capacity consolidation, and a reduction in the fixed cost component of production. It is the belief that value creating innovation in the industry will enable the CPG industry to regain relevance and loyalty with the consumer while being more efficient (reducing costs), and enabling the investment necessary to sustain profitable growth. The annual organic growth in the CPG industry ranges between 2-6%. This thesis analyzes the effects of technology on marketing, as a value creating catalyst for profitable growth. The analysis starts with a review of the frameworks on strategy proposed by Hax, evolutions in consumer shopping behavior by Falk, as well as developments in technology based marketing by Coviello. The thesis further reviews practical technology applications currently in the CPG field. The consumer survey section in the thesis evaluates three technology device concepts (FAST LANE, PRODUCT GPS, and AUTO REORDER) that were developed using technology lead-users. The information presented and conclusions argued in this thesis suggest that the technology device concepts have a strong value creating effect in marketing and on the business; a benefit that is appropriated to the consumer, the retailer, and the CPG manufacturer. The final pillar in the survey is an interview with two major retailers in the Boston area that validate the potential and willingness to implement such mutually value creating programs.<br>by Roger V. Chacko.<br>S.M.

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2012.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (p. 90-92).<br>CPGCo, a global manufacturer of consumer packaged goods, has had tremendous difficulty in producing accurate forecasts for its products in developing markets. The problem was especially apparent during the global economic crisis in 2008, which caused demand for its products to become highly volatile. Its troubles have been aggravated by its long forecasting horizon, as it has not been able to adjust quickly enough to rapid market shifts due to fluctuations in various macroeconomic indicators. As a result, CPGCo faces heavy stockouts and excess inventories. This thesis explores the suitability of using macroeconomic indicators to forecast consumer demand for three developing countries in Asia as well as three separate product segments. A total of 27 macroeconomic models are constructed using stepwise multiple linear regression analysis employing three separate dependent variables: the firm's monthly wholesale shipment volume, retail market share by volume, and retail sales. The world oil price and country-specific exchange rates, stock indexes, interest rates, consumer price indexes, and consumer confidence indicators are used as independent variables. With our models, we are capable of producing extremely accurate forecasts for a small sample set with errors at or below 7.2%. Our findings also indicate that the consumer price index has the most influence on consumer demand, appearing in 81% of our models; thus, we recommend that CPGCo tracks the consumer price index of each country to complement its current forecasting processes.<br>by Jonathan Mau and Bryan P. McFadden.<br>M.Eng.in Logistics

Thesis: S.M. in Management of Technology, Massachusetts Institute of Technology, Sloan School of Management, 2018.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (pages 61-63).<br>This study explores how Goods (CPG) industry to what trends this industry supply chain in the next solutions in an attempt to of this technology. Artificial Intelligence (AI) will help the Consumer Packaged address the future challenges in its supply chain. It analyses is already exposed to, and the impacts of those trends in its five years. The work also explores examples of available Al match the demand generated by future trends with the supply The scope is limited to the CPG manufacturers with a bigger focus on planning and distribution rather than manufacturing, since these processes are present in any company with small variances. Other supply chain players such as material suppliers, retailers, distributors, third party logistics (3PL), etc. are covered at a high level since they are part of the network and influence the dynamic of the system.<br>by Ana Paula Blanco.<br>S.M. in Management of Technology

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2011.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (p. 64-66).<br>Promotional events are a common occurrence in the grocery and drug industries. These events require consumer packaged goods manufacturers to deliver a large volume of product, beyond the typical demand, to the retailer in a short period of time. Two of these manufacturers, Manufacturer A and General Mills, are interested in exploring the benefits of an innovative distribution strategy: collaboratively shipping their promotional products direct to the retailer stores. This thesis describes a modified minimum cost flow optimization model, which was developed to compare the costs of this multi-manufacturer collaborative distribution strategy with two more traditional distribution approaches in which each company would deliver product independently. The first traditional strategy entails independently delivering product to the retailer distribution center, from where the retailer would transport the product to the stores. The second traditional strategy involves each manufacturer independently delivering directly to the retailer stores. Using a retailer that participated in a trial implementation of this collaborative distribution strategy in 2010 as a case study, the model is solved to find the lowest cost distribution strategy for the region served by each retailer distribution center. Results show that collaborative distribution is the most cost effective strategy in two thirds of the regions that were studied, and that this finding is fairly robust with respect to the input parameters. However, cost savings to the supply chain from employing the optimal strategy are relatively small, with savings to the retailer coming at an additional expense to the manufacturers. Therefore, this thesis concludes that the manufacturers' incentive to employ collaborative distribution depends upon a method of sharing savings with the retailer, or upon the expectation of increased revenue due to higher sales from employing this distribution strategy.<br>by Nanette Thi Le and Melanie Ann Sheerr.<br>M.Eng.in Logistics

Thesis: S.M. in Engineering and Management, Massachusetts Institute of Technology, School of Engineering, System Design and Management Program, Engineering and Management Program, 2016.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (pages 136-143).<br>The Consumer Packaged Goods (CPG) industry faces challenges that are making it increasingly harder for CPG multinational companies to compete. The lack of differentiation in CPG, evolving consumer preferences, and the need to offer the consumer a unique and valuable experience is requiring CPG multinational companies to continuously innovate. The Research and Development (R&D) function helps to overcome the pressing challenges that the CPG industry faces by contributing to the overall innovation that a firm can deliver. The underlying question is how R&D creates innovation in the context of a CPG multinational. Such innovation, in the form of new products and processes, would seemingly require a central R&D executive, defined in this thesis as the Chief R&D Officer, the person who is accountable for creating innovation for the firm in the R&D context. To contribute to innovation, the Chief R&D Officer must not only set the direction for R&D, but also execute this direction in terms of formulating the R&D strategy, and then managing the R&D organizational structure and leading the R&D organizational culture. The proposition is that the evolving role of the Chief R&D Officer is demanding that these senior executives think systematically about these elements to guarantee the short-term and long-term competitiveness of the R&D organization. If the Chief R&D Officer formulates the right strategy but has an inefficient organizational structure or lacks an innovative organizational culture, then the R&D organization will fail in creating innovation for the firm. This thesis also explores how Chief R&D Officers in the CPG multinational companies have coped with these key elements to achieve successful innovation.<br>by Javier Rodriguez Hefferan.<br>S.M. in Engineering and Management

Companies’ new primary source for sustainable revenue growth comes from creating new innovations, rather than from mergers and acquisitions. Companies are finding it difficult to align internal support for the innovative creativity of teams with standard operating procedures. This research aims to discover how innovative teams contribute to forming development strategies that CPG firms use to create new products. Dimensions of the Theory of Team Climate in Innovation (TTCI) offer insight on the dimensions of development strategy. Specifically, by integrating the theories, a proposed model identifies the innovation team’s impact on the firm’s development strategies. Such understanding has the potential to increase firm profits, lower innovation costs, increase innovation speed, and support innovation training. To empirically test this model, employees responsible for product development in the consumer packaged goods (CPG) industries were surveyed. Structural modeling techniques were used to analyze the data. Findings indicate support for using TTCI to explain the compressed development strategy. Theoretical contributions include: 1) extending TTCI and its associated measures into tangible products industries, 2) refining and adding to TTCI measures, 3) extending the development strategies theory into tangible products industries, and 4) adding to the measures for development strategy. Future research appears fertile for methods and measures used in this study, and managers in CPG will benefit from an enhanced understanding of how to better structure innovation teams in alignment with a firm’s development strategy.

Within the consumer goods industry, cartons are a common way to package a variety of products. Although the primary function of the packaging is to protect the product, it is also used as an advertising tool to promote the product. This, in conjunction with environmental pressures to reduce the amount of packaging, often leads to redesigns of the shape and size of the packaging. When such new designs are required, it becomes necessary to simulate their erection to ensure that this functions correctly. In this paper a constraint-based technique is employed to model the carton and to provide such a simulation. It is also possible to model the mechanisms used to erect cartons using the same techniques and hence simulate and improve the way in which carton faces are driven and guided. The techniques are also investigated in their ability to fold origami boxes. It is discovered that the form of the constraints used may need to change during the process, when previous folding operations limit subsequent possible motions.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.