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Decline in business environment in May continues in industry, construction and services

Data of business tendency surveys1 carried out by the Central Statistical Bureau (CSB) show that business environment in May 2023 continues to worsen in manufacturing, construction and services sector, but retail trade is the only sector where business environment is positive.

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.

In retail trade, despite the competition, business environment is improving

In May 2023 confidence indicator in retail trade was 8.1, according to seasonally adjusted data, and, compared to April, it has increased by 1.8 percentage points. The fastest growth of confidence indicator (of 17.6 percentage points) was in retail sale of fuel, reaching value 30.2. Business environment in retail trade of food products has improved by 7.0 percentage points, but in retail trade of non-food products it has worsened by 1.3 percentage points. In May business environment in sale of motor vehicles has improved by 4.6 percentage points, but in sale of motor vehicle parts and accessories as well as in repair of motor vehicles – by 3.9 percentage points.

26 % of retailers indicated that they feel no factors restricting their economic activity, and this is 1 percentage point less than in April. As summer is approaching, each fifth or 21 % of retailers indicated lack of labour force as a restrictive factor, and this indicator, compared to the previous month, has grown by 5 percentage points. Share of retailers indicating competition in trade sector as a factor restricting their economic activity was particularly high (50 %) in May. This is the highest value of this indicator since April 2019. 11 % of retailers indicated that their activity is restricted by various other factors, for example, availability of goods, high prices of energy resources, geopolitical situation, however, since the beginning of the year this indicator tends to decrease.

In services sector business environment drops below zero

In services sector, the seasonally adjusted confidence indicator in May 2023 was - 1.5 and business environment of entrepreneurs, compared to April, has worsened by 3.9 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 in accordance with the typical seasonality of the services provided, just like a month ago, are enterprises in travel agency and tour operator booking (31.5), air transport (26.3) and accommodation services (27.7). In turn, the lowest business confidence indicators in May were in warehousing and support activities for transportation (- 8.1), as well as in land and water transport sectors (- 13.0 and - 17.7, respectively). In total, out of 30 services sub-sectors surveyed in May environment of 18 sub-sectors is positive, of 12 – negative.

In May, 37 % 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 33 %, and their share, compared to the previous month, has increased by 2 percentage points. Activity of 15 % of entrepreneurs of services sector is restricted by various other factors (for example, geopolitical situation and prices of energy resources).

Business environment in construction is slightly worsening

According to seasonally adjusted data, in May confidence indicator in construction comprised - 10.8, which is 2.0 percentage points less as compared to the previous month.

In May, compared to April, according to seasonally unadjusted data, assessment regarding the current overall level of orders has dropped by 1.7 percentage points and regarding the expected changes of employment in the next three months – by 0.8 percentage points. In May, compared to April, confidence indicator in construction of buildings has risen by 3.9 percentage points, in specialized construction activities – by 3.0 percentage points. In turn, business environment in civil engineering has worsened by 9.4 percentage points.

Construction activity in May was mostly affected by insufficient demand and lack of labour force (indicated by 35.2 % and 30.5 % of respondents, respectively). Financial difficulties as a restrictive factor was mentioned by 16.8 % of respondents, but impact of weather conditions – by 12.0 % of respondents. Impact of various other factors (mainly, rise in prices of building materials) were mentioned by 4.0 % of respondents. In turn, 28.4 % of enterprises indicated that do not feel any factors restricting construction activity.

In manufacturing business environment has reached its lowest level during the last three years

According to seasonally adjusted data, confidence indicator in manufacturing in May comprised - 9.7. As compared to April, it has dropped by 2.5 percentage points.

According to seasonally unadjusted data, compared to the previous month, confidence indicators reduced by their share in largest manufacturing sectors – manufacture of wood and of products of wood and cork (of 11.4 percentage points), manufacture of fabricated metal products, except machinery and equipment (3.1 percentage points) and manufacture of food products (2.8 percentage points). Business environment rose in manufacture of electrical equipment (of 15.8 percentage points), repair and installation of machinery and equipment (3.1 percentage points) and manufacture of furniture (0.2 percentage points).

In manufacturing confidence indicator is calculated in 23 sectors. Of them in May, compared to April, in 18 sectors there was a drop in confidence indicator, in 4 sectors – a rise, but in one sector – business environment has not changed.

In May insufficient demand as a restrictive factor was mentioned by 49.5 % of manufacturing enterprises. Lack of labour force and lack of materials or equipment was indicated by 13.2 % and 14.8 % of respondents, respectively, but financial difficulties were mentioned by 11.6 %. Impact of other factors was indicated by 8.7 % of enterprises (inflation and impact of war in Ukraine is still mentioned the most). In May, 26.4 % of manufacturing enterprises have not felt any factor restricting economic activity.

In May 2023 economic sentiment indicator3 in Latvia comprised 93.7, (94.6 – 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.

The project is co-funded by the Europen Union

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

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