Release date 14. May 2021

Re-Opening of Last Service Sectors Taking Place

On Slovenia's Economy

• The number of registered unemployed is still declining (77.1 thousand on 11 May, 2,200 less than at the end of April), which coincides with the relaxation of restrictive measures in the hospitality industry (restaurants, hotels), growth in manufacturing and construction.

• According to data on tax certification of invoices (source: FURS), sales in the 2^nd half of April were up by a quarter year-on-year and quite similar to those in 2019. High year-on-year growth was influenced by further easing of restrictive measures (allowed transition between regions, opening accommodation establishments, service on terraces, and in some places also service inside bars). Sales in services that were still closed or where restrictions remained high (cultural, entertainment, sports, personal and catering services) were much lower than in 2019.

• During the last week of April, the traffic of lorries on Slovenian motorways was 29% higher than in the same period of 2019 (45% for domestic vehicles and 21% for foreign vehicles), when the volume of transport was lower also due to Labour Day holidays with one working day less.

• During the last week of April, electricity consumption increased by 20% year-on-year and compared to the same week in the pre-crisis year of 2019 by 2%. The reason for higher spending than before the crisis is in the relaxation of measures and the distribution of holidays. Compared to the comparable week of 2019, lower consumption was recorded in Austria (3%), France (4%) and Germany (1%), while in Croatia and Italy consumption was higher by about 4%.

• On 12 May, the government decided to amend the COVID-19 measures again. From 15 May a maximum of 50 people (football matches, theatre and cinema performances) will be able to attend events without seats. Tourist camps will also open - with an occupancy rate of max. 70%. All sports competitions are relaxed. The restaurants will be allowed to operate until 10 pm, and more than four people will be able to sit at the same table when from the same household with children among them. In doing so, participants will be required to demonstrate evidence of morbidity, vaccination, or a negative coronavirus test. The above stated evidence will also have to be provided at the transition to the green phase of relaxation measures. After five days, it will be possible to terminate the quarantine if it is ordered upon entry into the country by a negative PCR test. We estimate that the aforementioned changes will encourage activity in parts of tourism as well as encourage those who still hesitate to get vaccinated.

      Read also in the attachment about:

• Industrial production in manufacturing sector in March
• Structure of industrial production
• Exports of goods in March
• Exports of services in March
• The Spring Economic Forecast projects (European Commission)

On EU-27 

• Confidence in the manufacturing sector in EU-27 is at an all-time high, driven by record high production expectations and record low inventory levels. Looking at the larger eurozone economies, production expectations are at record highs in Germany, Spain, the Netherlands and almost in France but still significantly below record highs in Italy. Supply chain distortions over the first months of the year could still lead to delays and a more erratic path of industry on its return to normal. However, past experience has shown that any of these supply chain distortions will only delay the rebound of industrial production in the eurozone.
• Most EU countries are removing COVID-19 measures due to a drop in the number of people infected with COVID-19. In the EU-27, at least 30% of the population is expected to be vaccinated at least with the 1^st dose, with the EU aiming to reach 70% vaccination by mid-July.
• April US consumer prices were up 4.2% year-on-year, with higher used car prices coming as the biggest surprise. This is said to be due both to slow production growth due to a shortage of chips in the automotive industry and to the purchase of used vehicles by Americans who received government checks. The cost of residential real estate in the US represents one third of the basket, and the current higher construction prices are expected to contribute to the growth of this price component in the second half of this year. The Fed will have to tolerate high price growth for a few more months, which has revived expectations of a possible faster rise in the central interest rate in the United States. 

Must Read of the Week

• Central banks in a shifting world: selected takeaways from the ECB’s online Sintra Forum; available at: https://www.ecb.europa.eu/pub/sintra/html/ecb.forumcentbank.Takeaways.202105~940bc7c44e.en.htm)              

Comment: A great discussion on globalisation, implications of climate change, options for formulating the ECB's inflation aim, challenges with informal monetary policy communication, relationships between financial stability and monetary policy, how to make a monetary policy framework robust to deflation or inflation traps and the role of fiscal policy for the recovery from the pandemic.

Forecast of the Week

• May 2021 Consumer Confidence in Slovenia (Statistical Office of RS): +3 b. p. vs April 21 figures

Comment: Months of opening of economy usually coincide with increase in consumer sentiment. There’s low probability of an alternative path as labour market is improving

Quote of the Week

“Forecasts aren’t worth very much, and most people who make them don’t make money in markets.”
(Ray Dalio)

More information at: bojan.ivanc@gzs.si

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