The May decline in the industry. What are the reasons for the experts? In May, compared to May 2017, the volume of industrial production according to calendar-adjusted data in comparable countries

According to Central Statistical Bureau (CSB) data, prices fell by 1.1%.

The decline in production was in the supply of electricity and gas – by 16.4%, because the effect of hot and dry weather was on the decline of electricity production in hydroelectric plants and gas supply to consumers. The increase in the volume of production was 2.9% in the manufacturing industry and 7.1% in the mines and quarries

Compared to the corresponding month of the previous year, production of motor vehicles, trailers and semi-trailers has increased the most. – by 27%, in the repair and installation of machinery and equipment – by 25.6%, in the manufacture of computers, electronic and optical equipment – by 24.6%, and in manufacturing machinery, equipment and machinery – 17.8%. As in previous months, production also increased 3.6% in the manufacture of wood and wood products and 7.3% in the manufacture of metal products, with the exception of machinery and equipment [19659007]. , 4%, in paper and paper products – 7.2%, in beverages production – 6.6%, in textiles – 6.5%, in the manufacture of basic pharmaceutical products and pharmaceutical preparations.

2018. Compared to April 2018, industrial production volumes decreased 0.2% seasonally adjusted at constant prices, driven by a 6.7% decline in the supply of goods and services. Electricity and gas, but an increase of 1.9% in the manufacturing sector, as well as mines and quarries – by 9.4%

The economist of Swedbank Linda Vildava: Increase in the number of workers

Growth rates in the manufacturing sector after the March slowdown continue to recover, but relatively slowly. Production volumes rose 2.9% in May. Thus, in the first five months of 2018, processors grew an average of 3.9% over the same period last year. Meanwhile, the mood of Latvian manufacturing companies has stabilized over the past three months. The current global valuation of orders, finished product inventories and the stabilization of future production expectations have halted the recession that could have been observed in the first few months of the year.

However, some indicators show a slightly different and less appealing picture. Since the beginning of the year, businessmen have been rather pessimistic about selling prices over the next three months, believing that they will decrease. At present, nothing has changed in the valuation of companies. Namely, they are still waiting for the price trend to be downward, which is one of the potential signals for the relatively slow development of the manufacturing industry. Similarly, although the badessment of operators for total orders has stabilized, the valuation of export orders has declined. Namely, more companies than previously, believe that post-production export orders are insufficient. Thus, the role of local market demand in common orders is increasing. This is normal: European economies are growing, but more slowly, trade risks and uncertainties are increasing, while some local industries, such as construction, are changing rapidly. This is also evident in the growth rate data for both sectors and sales. Construction-related industries, such as the production of non-metallic minerals and metal products, and the wood industry, are better off and domestic sales growth rates exceed the pace of exports. However, without sustainable exports, it will be difficult to achieve long-term sustainable growth.

According to the survey data, the indicator, which shows a strong growth and a positive trend, is that of expectations in terms of employment. Namely, companies expect to increase the number of employees. This is certainly a necessity for business growth, and this is not surprising considering the high capacity load. However, hiring new employees will not be cheap. According to the State Revenue Service data, in the first five months of the year, the average salary per employee has risen sharply by 9% per year. Thus, the issue of productivity growth and investment becomes more current to maintain competitiveness.

Luminor economist Peter Strautiņš: The industry lacks energy

August 2016. "Convict" is not difficult to find – production fell by 16.4% in energy. Given the huge difference between the amount of rainfall this year and last year, the decline in the double digit figure is expected at least until August.

Trends in the economy, not weather, are reported by the manufacturing industry, where production increases. In May, it was 2.9% higher than a year ago, but overall in the first five months – by 3.6%. The supposedly mediocre May performance is explained by the base effect – last month, production rose sharply. However, this month looks good, compared to April, it is up 1.9%. To a large extent, it was provided by three sectors: the wood sector (+ 4.7%); electronics (+ 20.0%) and manufacturing machinery, machinery and equipment (+ 17%).

A little deteriorated in the already unfavorable scenario of food processing, the variations of the month and the year are -0.2% and -3.6% respectively. This is mainly due to the recession in milk processing, which for the fifth consecutive month falls by almost a third percent in annual terms. For agriculture, this year is very difficult, but food processing should not be seriously affected – raw milk and grain will in any case produce more than can be recycled. The main problems are recycling. In most subsectors, there is still a lack of ambition and investment, and a strong shift towards export markets. This is exactly the approach that has taken the rapid growth of grain processing volumes for several years, especially at Dobele Dzirnavnieks. In each sub-sector, these companies are, for example, in fish processing, export volumes are quickly grown in Karavela. However, it is still not able to offset the recession elsewhere. The brightest figures of the month of electronics and equipment production have been restored in areas of solar radiation in which the NACE nomenclature bears numbers 25 to 30, that is, to ie metallurgy, electronics and electronics. three engineering sectors for which the CSB publishes data. In all, this year, production has increased, especially rapidly. In May, there is a slight decline in annual output in the production of electrical equipment, but this is not unfortunate, as last month, it was an increase of nearly 60% . The future prospects for this industry are always excellent. This year's data in electronics was surprisingly weak. Its overall result depends heavily on a company. Regarding macroeconomic factors, the activity of Micro-Net could be affected by the low exchange rate of the dollar at the beginning of the year, the deficit of the sectoral component. In May, the dollar exchange rate rose rapidly and the electronics sector returned to Latvia in the usual double-digit growth of previous years.

When the manufacturing industry went through a difficult period in 2013-2015, the woodworking industry saved them from the moment of its full growth. When in 2016 – 2017 the producers were generally better off, the woodwork could "afford" the bottlenecks. In April and May this year, wood processing grew faster than the entire manufacturing industry, which was not typical of the past two years. The sector is currently developing peacefully, although the tensions are caused by high log prices. This year, a very unusual situation has occurred – the high prices are not for individual badortments, as it happens, but for all the badortment of logs. Last year, the increase in roundwood prices was caused by the high humidity caused by forestry. Currently, prices are gradually decreasing, but they have great inertia. Forest owners are getting used to a high price level and are reducing their sales, as prices are falling slightly. Similarly, the supply of resources is limited by the lack of operational capabilities.

Therefore, market segments that otherwise exist separately are merged. If 60 cubic meters of softwood are sold at ports in harbors, it is not advantageous to remove the most beautiful logs from this stream. Their price becomes inappropriate for the large amount of products that can be obtained from these trees. Slab lumber processing is a niche in which small sawmills are unscathed, who have not been able to make significant investments in efficient mbad production, which makes them are difficult right now. The costly raw materials reduce the production of pellets. On the other hand, high log prices are high, but the sector deficit is just as normal as the lack of programmers in the information technology sector supported by the high price of products supported by active construction in the Nordic countries and the United Kingdom

. Therefore, investments in the processing of new raw materials are welcome. Very interesting is the investment project of Kronospan Riga of nearly 100 million euros to increase the production of particle board. It provides recycling t.s. Secondary wood – parts of demolished houses, antique furniture. Its implementation would be an important step in the development of the forest sector.

Economist of the bank Citadele Mārtiņš Āboliņš: Customs tariffs are under threat

After more than three years of continuous growth, in May Latvian industry recorded the first decline in production since 2015, with a fall in industrial production of 1.1% appropriate in the previous year. This is not an encouraging news, since last year the industry with more than 8% growth was one of the main drivers of the Latvian economy. The main reason for this negative surprise from the industry in May was the sharp drought, which resulted in a significant drop in electricity production in hydroelectric power plants in May and production in the sector. energy fell 16.4%.

Time is obviously a transient factor, but this is not the only reason for an unexpected drop in production in May. In May, for the third month in a row, relatively weak results were recorded in the manufacturing sector, where production volumes increased only 2.9% from one year to the next. , mainly because of external factors. Since the beginning of the year, growth in the manufacturing industry in other euro area countries has declined sharply, export growth has become much more moderate in the Baltic countries and manufacturing output has increased more than faster than that of the Latvian domestic market

. In the coming months, the development of the sector will become more positive. The latest data on the global economy suggest stable economic growth and, after several months of stagnation, world trade is on the rise again. In addition, in May, good industrial growth was recorded in Lithuania and Estonia, and the feeling of producers in Latvia, although weaker than at the end of last year, is still in good health.

Still in our Citadele index surveys, the industry has long been the most optimistic sector in Latvia, but this optimism has so far not been reflected in any new investments. After positive quarterly growth at the end of last year, non-financial investment in the manufacturing sector fell by 15.2% in the first quarter of this year, while the volume of new loans in the first quarter of the year fell sharply. manufacturing industry decreased by 21.1%. Thus, non-financial investment in the manufacturing sector in the first quarter of this year was slightly less than 40 million. the euro and it already has a level of investment lower than that of the crisis. Therefore, there is a concern or the development of the industry is not hampered by the lack of production capacity at the present time.

However, the main threat to the development of the Latvian manufacturing industry is, currently, the further escalation of commercial tariffs. It is unlikely that Latvian exports will directly affect US commercial tariffs, as we export relatively little to the United States, but they can have a significant indirect impact on us since we export a lot to European countries with significant trade surpluses with United States. This would be most likely to affect the different sectors of metallurgy and mechanical engineering. These risks, with only 3.6% in the manufacturing industry during the first five months of the year, call into question the forecast made earlier this year that manufacturing volumes in Latvia could grow. from 5 to 7% this year, and that the growth of the manufacturing industry this year would be 4-5%. This means that Latvia's economic growth will be based much more on domestic consumption, as evidenced by the more than 35% increase in construction in the first quarter and 7% in May, as well as the positive trends in the labor market. . However, a further escalation of trade disputes may already require a review of not only industrial but also economic forecasts for the development of the economy.

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