In April business environment has worsened in all business sectors

Data of business tendency surveys¹ carried out by the Central Statistical Bureau (CSB) show that in April 2023 business environment has worsened in all business sectors. In retail trade and services sector it retained positive values, but in manufacturing and construction business environment is 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.

Optimism of entrepreneurs reduced in retail trade

In April 2023 confidence indicator in retail trade was 6.1, according to seasonally adjusted data, and, compared to March, it has reduced by 2.4 percentage points. Business environment, according to seasonally unadjusted data, was positive in all sub-sectors of retail trade. The fastest growth of confidence indicator (of 10.6 percentage points) was in retail sale of fuel, reaching value 12.6. Business environment in April improved in retail trade of food and of non-food products (by 9.0 and 6.0 percentage points, respectively), however, the growth is mainly explained by seasonality characteristic to the sector. In turn, after a rise in the previous month, business environment in April in sale of motor vehicles – even though it was positive – reduced by 5.6 percentage points.

27 % of retailers indicated that they feel no factors restricting their economic activity, and this is 1 percentage point more than in March. Lack of labour force as a restrictive factor was mentioned by 16 %, and this indicator is very stable since the beginning of the year. In turn, insufficient demand was indicated by 30 % of retailers, and that is 1 percentage point more than in March. In the first months of the year the share of respondents mentioning competitiveness as a restrictive factor has increased. Their share in April comprised 44 %. 12 % of retailers indicated that their activity is restricted by various other factors, for example, availability of goods, high prices of energy resources, geopolitical situation, and this is the lowest value since April 2020. With the beginning of the pandemic three years ago this indicator increased rapidly, when it was indicated by 54 %.

In services sector business environment is worsening, however, remains positive

In services sector, the seasonally adjusted confidence indicator in April 2023 was 2.7 and business environment of entrepreneurs, compared to March, has worsened by 2.4 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 are enterprises in travel agency and tour operator booking (34.2), air transport (28.1) and accommodation services (24.4). In turn, the same as in March, the lowest business confidence indicators were in security and investigation services (- 10.0), as well as in land and water transport sectors (- 13.5 and - 13.8, respectively). In total, out of 30 services sub-sectors surveyed in April environment of 19 sub-sectors is positive, of 11 – negative.

In April, 39 % of services sector enterprises do not feel any factors restricting their economic activity. Activity of 17 % of entrepreneurs was significantly restricted by lack of labour force, in turn, insufficient demand as restrictive factor was indicated by 31 %, and their share, compared to the previous month, has reduced by 1 percentage point. Activity of 14 % of entrepreneurs of services sector is restricted by various other factors (for example, geopolitical situation and prices of energy resources), however, their share is reducing since November 2022, with the indicator reaching its lowest value since April 2020.

Business environment in construction without any significant changes

According to seasonally adjusted data, in April confidence indicator in construction comprised - 8.4, which is 0.5 percentage points less as compared to the previous month.

In April, compared to March, according to seasonally unadjusted data, assessment regarding the current overall level of orders has improved by 7.7 percentage points and regarding the expected changes of employment in the next three months by – 0.4 percentage points. In April, compared to March, confidence indicator in civil engineering has risen by 11.3 percentage points, but in specialized construction activities – by 2.3 percentage points. In turn, business environment in construction of buildings worsened by 1.1 percentage points.

Construction activity in April was mostly affected by insufficient demand and bad weather conditions (indicated by 35.8 % and 30.9 % of respondents, respectively). Lack of labour force as a restrictive factor was mentioned by 26.9 % of respondents, but financial difficulties – by 17.3 % of respondents. Impact of various other factors (e.g., rise in prices of building materials, conditions in procurement and war in Ukraine) were mentioned by 3.4 % of respondents. In turn, 20.8 % of enterprises indicated that do not feel any factors restricting construction activity.

In manufacturing business environment is worsening and still is negative

According to seasonally adjusted data, confidence indicator in manufacturing in April comprised - 6.9. As compared to March, it has dropped by 1.9 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 food products (4.0 percentage points), manufacture of beverages (3.0 percentage points) and manufacture of non-metallic mineral products (1.8 percentage points).

Business environment worsened in manufacture of chemicals and chemical products (of 8.2 percentage points), manufacture of fabricated metal products, except machinery and equipment (0.4 percentage points), manufacture of wood and of products of wood and cork (0.1 percentage point).

In manufacturing confidence indicator is calculated in 23 sectors. Of them in April, compared to March, in 10 sectors there was a rise in confidence indicator, in 11 sectors – a drop, but in two sectors – business environment has not changed.

In April insufficient demand as a restrictive factor was mentioned by 46.1 % of manufacturing enterprises. Lack of labour force and lack of materials or equipment was indicated by 13.3 % and 13.6 % of respondents, respectively, but financial difficulties were mentioned by 12.3 %. Impact of other factors was indicated by 11.2 % of enterprises (inflation and impact of war in Ukraine is still mentioned the most). In April, 24.9 % of manufacturing enterprises have not felt any factor restricting economic activity.

In April 2023 economic sentiment indicator³ in Latvia comprised 94.9, (97.7 – in the previous month). This 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.

Media requests:
Communication Section
E-mail: media@csp.gov.lv
Phone: +371 27880666

More information on data:
Ieva Vanaga
Trade and Services Statistics Section
E-mail: Ieva.Vanaga@csp.gov.lv
Phone: +371 67366738

Sandra Vītola
Industrial and Construction Statistics Section
E-mail: Sandra.Vitola@csp.gov.lv
Phone: +371 67366739