Business environment in manufacturing and construction slightly continues to improve in February
Data of business tendency surveys1 carried out by the Central Statistical Bureau (CSB) show that in February 2023, business confidence indicators were positive in retail trade and services sector, while in manufacturing and construction, although continued to improve, business confidence indicators still are negative.
Business confidence indicators characterize general situation in the sector and they are acquired by carrying out business surveys in industry, construction, retail trade and services sector. If the indicator is above zero, business environment is positive, if it is below zero – business environment is negative.
Restrictive factor in retail trade – competition – has reached the highest level during the last three years
In February 2023 confidence indicator in retail trade was 6.8, according to seasonally adjusted data, and, compared to January, it has reduced by 0.1 percentage point. According to seasonally unadjusted data, confidence indicator in retail sale of fuel has improved rapidly (by 11.8 percentage points), reaching value - 2.6. But in other sub-sectors of retail trade business environment was slightly more pessimistic than in January. In retail sale of food and non-food products indicators of environment were - 0.5 and 4.8, respectively, in sale of motor vehicles 3.1, but in sale of motor vehicle parts and accessories and repair of motor vehicles - 3.2.
In February, the same as a month ago, the share of retail sale enterprises feeling no factors restricting their economic activity comprised 24 %. Lack of labour force as a restrictive factor was mentioned by 16 %, and also this indicator, compared to January, has not changed significantly. In turn, insufficient demand is indicated by 31 % of retailers, and that is 3 percentage points more than in January. Competition, which is always topical restrictive factor in retail trade, was mentioned by 47 % of entrepreneurs as a limiting factor in February. During the last three months this indicator is increasing each month. In February, compared to January, the rise was particularly high – by 5 percentage points, as the indicator reached the highest value of the last three years. In turn, compared to January, the number of retailers having indicated various other factors as a restrictive factor, for example, availability of goods, price rise of energy resources, geopolitical situation, has reduced by 4 percentage points.
In services sector environment positive for already fourth consequent month
In the services sector, the seasonally adjusted confidence indicator in February 2023 was 3.4 and business environment of entrepreneurs, compared to January, has worsened by 0.7 percentage points. As usual, indicators of environment differ significantly in various services sectors, and also trend of their changes differ depending on the specificities of the sector and seasonal impact. The most optimistic entrepreneurs in February were in computer programming (21.3), insurance (21.7) and advertising and market research (20.7). But the lowest indicators of environment were in land transport sector (- 19.7), catering (- 13.7) and accommodation (- 13.6). In total, out of 30 services sub-sectors surveyed in February environment of 17 enterprises was positive, of 11 – negative, but in two (water transport, as well as labour recruitment and provision of personnel) confidence indicators equalled zero.
In February, 36 % of enterprises of services sector have not felt any factor restricting economic activity. Compared to January, their share has increased by 2 percentage points, and the indicator reached the highest level during the last two years. Activity of 19 % of entrepreneurs was significantly restricted by lack of labour force. In turn, insufficient demand as restrictive factor in February was indicated by 28 % of services sector enterprises, and their share, compared to the previous month, when it was particularly high, has dropped by 3 percentage points.
Business environment has slightly improved in construction
According to seasonally adjusted data, in February confidence indicator in construction comprised - 10.8, which is an increase of 0.8 percentage points as compared to the previous month.
In February, compared to January, according to seasonally unadjusted data, the assessment regarding the expected changes of employment in the next three months has improved by 13.9 percentage points, as well as the assessment regarding the current overall level of orders has grown by 2.1 percentage points. Confidence indicator in February, compared to January, has grown in construction sub-sectors – in civil engineering by 16.4, in construction of buildings – by 2.9, but in specialized construction activities – by 2.1 percentage points.
Construction activity in February was mostly affected by bad weather conditions (indicated by 39.6 % of respondents) and insufficient demand (38.9 % of respondents). Lack of labour force as a restrictive factor was mentioned by 20.0 %, but lack of materials or equipment – 6.9 % of respondents. Impact of financial difficulties and other factors was indicated by 13.5 % and 6.3 % of respondents, respectively, (mainly rise in prices of building materials, costs of labour force and conditions in procurement were mentioned). In turn, 15.6 % of entrepreneurs indicated that construction activity is not restricted by any factor.
Business environment in manufacturing is slightly improving
According to seasonally adjusted data, in February confidence indicator in manufacturing comprised - 6.8. As compared to January, it has increased by 0.6 percentage points.
According to seasonally unadjusted data, compared to the previous month, confidence indicators have risen by their share in largest manufacturing sectors – manufacture of wood and of products of wood and cork (of 11.1 percentage points), manufacture of food products (0.5 percentage points) and manufacture of fabricated metal products, except machinery and equipment (0.9 percentage points).
Business environment has worsened in manufacture of basic pharmaceutical products and pharmaceutical preparations (5.8 percentage points), manufacture of machinery and equipment n.e.c. (6.5 percentage points), as well as manufacture of paper and paper products (5.3 percentage points).
In manufacturing confidence indicator is calculated in 23 sectors. Of them, compared to January, in 15 sectors there was a rise in confidence indicator, in 7 – a drop, in one sector business environment has not changed.
Insufficient demand and lack of labour force as a restrictive factor in manufacturing in February was mentioned by 43.9 % and 14.7 % of enterprises, respectively. Lack of materials or equipment, in turn, was mentioned by 13.7 % of respondents, but financial difficulties – by 11.8 %. Impact of other factors was indicated by 14.3 % of enterprises (inflation and impact of war in Ukraine is mentioned the most). In February, 25.8 % of manufacturing enterprises have not felt any factor restricting economic activity.
In February 2023 economic sentiment indicator comprised 95.23, (93.5 – in the previous month). Economic sentiment indicator characterizes general socio-economic situation in the country during a certain period of time (month), and it is calculated by the European Commission, Directorate-General for Economic and Financial Affairs for all EU countries according to a common methodology, taking 15 various seasonally adjusted components included in industry, construction, retail trade and services sector, as well as in consumer confidence indicator4, as a basis.
1 Business surveys in industry, construction, retail trade and services sector are carried out by the CSB monthly, accordingly methodology of the Joint Harmonised EU Programme of Business and Consumer Surveys co-financed by the European Commission.
2 Net (balance) is calculated as difference between positive and negative answers of entrepreneurs surveyed, which are expressed in per cent.
3 Value of the indicator exceeding 100 means that numeric characteristic of the economic situation exceeds long-term average value (2000–2021). While value of the indicator smaller than 100 means that characteristic of economic situation is below long-term average value.
4 Consumer survey is carried out monthly by the enterprise “Latvijas Fakti” accordingly methodology of the Joint Harmonised EU Programme of Business and Consumer Surveys co-financed by the European Commission.
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