Release date 4. June 2021
Slovenian Households Contributed to the Economic Growth in the First Quarter
Gross domestic product (GDP) in Slovenia increased by 1.6% in real terms in the first quarter of 2021 (adjusted for the season and the calendar by 2.3%), which is comparatively the highest growth among EU member states that have already published data on the Eurostat portal. Ex-ante we estimated that the decline would be smaller than the EU-27 average, somewhere around 1%, and we were among the most optimistic. The weighted decline in the EU-27 was (excluding seven smaller EU countries) at 1.7% (seasonally and calendar-adjusted, which provides an appropriate comparison), with Portugal (-5.4%), Spain and Germany (-3.0%) recording the largest declines (-4.3%), but the situation was quite different between comparable Central European countries. Only Slovakia recorded a slight increase (+ 0.5%). The mean decline (differs from the weighted one because it equals large and small members) stood at 1.3%, which is slightly less than the weighted one and is due to the fact that larger economies are more developed, with a higher share of services, especially tourism and experienced, on average, larger drops in GDP.
A look at the movement of the consumer price index in Slovenia (+ 2.1% year on year in May) shows that the change is quite like the HICP index (+2.2 %) but its weights have not changed in beginning 2021. Despite the rise in prices of agricultural raw materials, this is not yet evident in the prices in the food and non-alcoholic beverages category, where prices were down by 2.5% year on year (in the first five months they were down by 0.8%). Prices in the category of recreation and culture still have not grown yet (-3.3% year on year; -3% in the first five months). In group restaurants and hotels (+0.9% in May year on year; + 0.7% in the first five months) growth is low. This shows that service inflation is not present even at the opening of activities, because there is a lot of spare capacity, and consumers are only cautiously using these services again.
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May’s economic expectations in EA-19 construction hinted at a slight expansion in the coming months, mainly driven by growth in new orders. Italian and French construction companies showed the greatest growth in optimism, while orders in the German construction sector even declined. Construction activity in commercial housing construction is still declining slightly, mainly due to lower investment in Germany, while growth in this area is present in both Italy and France. There is no growth in civil engineering, work has been declining for 22 months. However, the Recovery and Resilience Plan should contribute to improvement, but especially in the coming year. The construction sector has problems with the supply of construction materials, most notably the German construction companies, which have never encountered such difficult circumstances in the history of these surveys.
The index of purchasing managers in manufacturing in the EA-19 reached its highest level in May, 63.1 (24-year peak), which was above the first estimate (62.8). Record levels were recorded in the Netherlands, Austria, Italy, and Ireland, while France, Spain and Greece were only a short distance from the record level. Long delivery times raise the price level for raw materials and semi-finished products, as manufacturers compete for a limited set of input materials. As demand spreads like a tide, it has reached almost all members, much the same in world production. A look at the scale of expectations between countries (JP Morgan Global Manufacturing) shows that optimism is greatest in the EA-19, remaining EU-27 member states and the US, followed by Taiwan, Australia, Canada (the last major producers of raw materials), Brazil and South Korea. It is quite difficult to imagine this index to rise in the next couple of months, although it may remain close to its heights for 2-3 months more.
Comment/Abstract: This 20th annual review of the international role of the euro published by the ECB presents an overview of developments in the use of the euro by non-euro area residents. COVID-19 pandemic year 2020 did not result in a significant change in the international role of the euro. In particular, the euro’s share in outstanding international loans, in the stock of international debt securities and as an invoicing currency for extra-euro area imports of goods remained broadly stable. The share of the euro in global foreign exchange reserves declined, as did the share of the euro in foreign currency-denominated debt issuance and in outstanding international deposits.
April 21 Industrial production in Slovenia (Statistical Office of RS): +24% year on year
Comment: A huge drop in April 20 (-23%) can be countered only by a huge rise in a similar range (+24%). .
“Whenever I see a forecast written out to two decimal places, I cannot help but wonder if there is a misunderstanding of the limitations of the data, and an illusion of precision.”
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