In January business environment in retail sale and services remains positive

Data of business tendency surveys¹ carried out by the Central Statistical Bureau (CSB) show that in January 2024 business environment was positive in retail trade and services sector, but, compared to the previous month, it has slightly worsened. In construction and manufacturing business environment is permanently negative, without any significant changes.

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.

Business environment in retail trade has worsened

In January 2024 confidence indicator in retail trade was 0.6, according to seasonally adjusted data, and, compared to December 2023, it has decreased by 3.1 percentage points. Business environment in retail sale of food products, according to seasonally unadjusted data, in January, compared to December, has improved by 7.0 percentage points, but still was negative (- 3.7). In turn, business environment in retail sale of non-food products, which was positive throughout all 2023, dropped slightly below zero in January (- 1.0). Compared to December, confidence indicator in retail trade of fuel rose by 3.5 percentage points, where it was very low (- 17.5), which is typical to the season. In sale of motor vehicles business environment continued to deteriorate reaching the lowest indicator since March 2021 (- 20.3). Also in sale of motor vehicle parts and accessories and repair of motor vehicles confidence indicator in January was negative (- 1.6).

The share of retail sale enterprises feeling no factors restricting their economic activity comprised 23 % in January. Particularly high value (37 %) was reached by the share of retailers who indicated insufficient demand as a limiting factor. Last time, when this indicator exceeded 35 %, was in June 2020, when significant, pandemic-related limitations were valid in retail trade. Share of retailers indicating competition in trade sector as a limiting factor in January, compared to the previous month, has decreased rapidly by 10 percentage points, dropping below 40 %. In turn, lack of labour force as a limiting factor was indicated by 17 % of retailers, and that is 4 percentage points less than in December.

In services sector business environment positive for already second consequent month

In the services sector, the seasonally adjusted confidence indicator in January was 1.8 and business environment, compared to December, has worsened by 0.8 percentage points. As usual, business environment indicators differ significantly in various services sectors, and also trend of their changes differ depending on the specificities of the sector and seasonal impact. According to seasonally unadjusted data, the most optimistic in January were providers of advertising (20.1) and information services (19.8), as well as entrepreneurs whose main activity is labour recruitment and provision of personnel (19.9). In turn, the lowest business confidence indicators in January were in water transport (- 20.0), accommodation (- 32.5) and security services (- 23.5). In total, out of 30 services sub-sectors surveyed in January environment of 18 sub-sectors was positive, of 12 – negative.

In January, 39 % of services sector enterprises did not feel any factors restricting their economic activity. Activity of 34 % of entrepreneurs was significantly limited by insufficient demand. As compared to the previous month, when this indicator reached the highest value of 2023, in January it has dropped by 6 percentage points. In turn, lack of labour force and financial difficulties as a limiting factor were indicated by 17 % and 10 % of enterprises of services sector, respectively.

Business environment in construction stably negative

In construction, according to seasonally adjusted data, confidence indicator in January comprised - 11.0, which is an increase of 0.5 percentage points as compared to the previous month.

In January, compared to December, according to seasonally unadjusted data, the assessment of entrepreneurs regarding the expected changes of employment in the next three months has increased by 25.4 percentage points, while the assessment regarding the current overall level of orders has risen by 0.7 percentage points. Confidence indicator in January, compared to December, has grown in all construction sub-sectors – in civil engineering by 21.7, in specialized construction activities – by 9.7, but in construction of buildings – by 6.3 percentage points.

Construction activity in January was mostly affected by bad weather conditions and insufficient demand (indicated by 61 % and 31 % of respondents, respectively). Lack of labour force and financial difficulties as a limiting factor was indicated by 17 % and 13 % of construction enterprises, respectively. Lack of materials or equipment was indicated by 5 %, but 14 % of entrepreneurs surveyed did not feel any factors limiting construction activity in January.

Business environment in manufacturing is slightly improving

According to seasonally adjusted data, confidence indicator in manufacturing in January comprised - 8.2. As compared to December, it has increased by 1.2 percentage points.

According to seasonally unadjusted data, compared to the previous month, in January business environment has risen by their share in largest manufacturing sectors: manufacture of wood and of products of wood and cork (of 10.2 percentage points), manufacture of food products (6.5 percentage points) and manufacture of fabricated metal products, except machinery and equipment (6.4 percentage points). In turn, environment deteriorated in manufacture of computer, electronic and optical products (by 5.5 percentage points), manufacture of paper and paper products (by 5.4 percentage points) and manufacture of clothing (by 12.2 percentage points).In manufacturing confidence indicator is calculated in 23 sectors. In January, compared to December, in 17 sectors there was a rise in confidence indicator, in 5 sectors – a drop, but in one sector – business environment has not changed.

In January insufficient demand as a limiting factor was mentioned by 52 % of manufacturing enterprises. Lack of labour force and financial difficulties was indicated by 14 % and 13 % of respondents, respectively, but lack of materials or equipment was mentioned by 12 %. Impact of other limiting factors was indicated by 7 % of enterprises, but 23 % of enterprises in manufacturing in January did not feel any factors limiting their economic activity.

In January 2024 economic sentiment indicator³ in Latvia comprised 96.4, (in the previous month – also 96.0). Economic sentiment indicator characterizes general socio-economic situation in the country in a defined period (month), taking components included in 15 various seasonally adjusted industry, construction, retail trade and services sector, as well as in consumer confidence indicator⁴, as a basis. Value of the indicator above 100 means that numeric characteristic of the economic situation exceeds long-term average value (2000 -2023). While value of the indicator below 100 means that characteristic of economic situation is below long-term average value.

Employment expectations indicator in November comprised 100.9 (99.5 – in the previous month). It is a composite indicator composed of seasonally adjusted employment change expectations in industry, construction, retail and service sectors, taking into account the share of employment in each of these sectors. Value of the indicator above 100 means that seasonally adjusted balance of employment change expectations exceeds long-term average value (2000 – 2023). While value of the indicator below 100 means that balance of employment change expectations is below long-term average value.

Economic uncertainty indicator comprised 23.3 (23.5 – in the previous month). This indicator describes the predictability of socio-economic situation in the country, and it is composed of predictability of enterprises’ economic activity indicators in industry, construction, retail trade, services sector, as well as consumers’ assessment of the predictability of household’s financial situation. If the indicator is above zero, the uncertainty of socio-economic situation is high, it’s difficult to predict its development, if it is below zero, it is easy to predict the situation, it is more certain. In January, compared to December, uncertainty reduced in all mentioned business sectors: in manufacturing by 0.5, in construction by 0.4, but in retail trade and services sector by 2.4 and 2.1 percentage points, respectively, however, according to the assessment of consumers uncertainty has increased by 3.5 percentage points.

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 Economic sentiment indicator, employment expectations indicator and economic uncertainty indicator are calculated by the General Directorate of Economic and Financial Affairs of the European Commission (ECFIN) using the results of business tendency surveys conducted by the Member States, according to a common methodology.

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