Weekly Economic Highlights: The Metal and the Electrical Industry - the Winners of the Recovery

14.6._2021_Weekly Economic Highlights v2

Release date 11. June 2021

The Metal and the Electrical Industry - the Winners of the Recovery

On Slovenia's Economy

  • Data on industrial production for April 2021 exceeded our expectations by some margin. Industrial production (mining, manufacturing and energy supply) increased by 36% year-on-year (our expectations: +24%), by as much as 11% during the first four months (the revision also contributed favourably to this growth). During this period, it was lower by 5.6% in mining (reduction in coal mining at Premogovnik Velenje according to our estimates), lower by 1% in energy and 12% higher in manufacturing. Our estimate for the full year is a growth rate of 5% in industrial production and manufacturing, while the consensus of independent analysts stands at 7% (May 2021, Consensus Economics) and at 4.7% for next year (our estimate: +3%).

  • Data on sales by individual manufacturing sectors in the first four months show (pharmacy data are confidential) that revenues were higher compared to the same period in 2019 in the manufacture of other vehicles and vessels (+ 16%), the manufacture of electrical appliances (+ 12%), computers, electronic and optical products (+9%), rubber and plastic products (+9%), manufacture of other machinery and equipment (+8%), wood working and processing (+ 7%), manufacture of fabricated metal products 6%), production of chemicals (+5%), production of furniture (+5%) and in four other activities. Sales were lower in nine sectors. The largest drop were noticed in the following sectors: manufacture of leather and leather products (-37%, discontinuation of part of production of a larger company in Slovenia), manufacture of motor vehicles (-11%) and manufacture of wearing apparel (-10%). Due to the limited operation of tourist establishments, sales were still lower in the production of beverages (-5%), but the decline in sales in the production of non-metallic mineral products was surprising (-6%), as it includes larger manufacturers of thermal insulation and building materials which are expected to benefit from uplift in construction and green recovery deal.

  • The latest current data on truck traffic, electricity consumption and sales are as expected to show large year-on-year growth, so below we describe an exclusive comparison with the same period in 2019. In the last week of May, the turnover of lorries on Slovenian motorways decreased by 3% compared to the same period in 2019. Due to Pentecost Monday, the volume of truck traffic in some neighbouring countries was slightly lower than in the previous week and the same week of the pre-crisis year 2019 (4% higher for domestic vehicles and 7% lower for foreign ones). Electricity consumption between 24 and 28 May lagged behind by 6% compared to the same week in 2019. Compared to the comparable week in 2019, lower consumption was recorded by Austria (7%), Italy (6%), Croatia (5 %) and France (4%), while in Germany it was higher by 4%. According to data on tax certification of invoices, in the second half of May sales were 4% higher than in the same period of 2019, mainly due to growth in wholesale and retail trade. Sales in the part of services where business restrictions remained relatively high (cultural, entertainment and accommodation services, travel agencies, gambling) continued to be significantly lower than in the same period in 2019 (from - 68% to - 86%). The latest data on the registered unemployed (73,250 on 9 June) show that their number is still declining moderately (end of May: 75,150) as a result of the strengthening of manufacturing, construction and the opening of service activities.

On EU-27 

  • Optimism in the global steel industry has risen to its highest level in 12 years, driven by growth in new orders (fourth consecutive month) as well as the biggest growth in employment intentions since February 2018. On the other hand, high growth in iron ore prices, contributed to a record growth in raw material prices (input prices). In May, the price of a metric ton of iron ore (cfr spot, World Bank) rose to over USD 200, 107% higher than in May 2019 (before the pandemic outbreak ). Such high levels were last seen in 2011 and 2012 and before that in 2008, and price adjustments (decrease) were just as abrupt as the increase itself. Among larger steelmakers, optimism strengthened the most in the US and Europe, while growth in Asian countries remained at similar, although high levels (the PMI indicator mainly reflects the strength of change, but less the current level). Both American and European steelmakers had a common point of concern: poorer availability of input materials. The situation was quite similar with the largest producers of aluminium products. Large European aluminium producers recorded the highest business growth, followed by American and Asian ones. Higher raw material costs have been partly passed on to customers and companies will partly face margin shrinkage, but this is not so worrying as the  organic growth is high. Large producers of copper products face a similar scenario. At the same time, companies are recording growth in both domestic and foreign orders. 

Must Read of the Week

Comment/Abstract: Central bank digital currencies (CBDCs) could ease current frictions in cross-border payments – and particularly so if central banks factor an international dimension into CBDC design from the outset. Based on a survey of 50 central banks in the first quarter of 2021, this paper explores initial thinking on the cross-border use of CBDCs. While most central banks have yet to take a firm decision on issuing a CBDC, the survey responses show a tentative inclination towards allowing use of a future CBDC by tourists and other non-residents domestically. They have a cautious approach to allowing use of a CBDC beyond their own jurisdiction. 


Forecast of the Week

  • April 21: Export of Services in Slovenia (Statistical Office of RS): +40% year on year

Comment:  Transportation Sector should provide much of the boost to the annual growth, whereas foreign tourism should cover some losses.


Quote of the Week

“The differences between forecasts are trivial relative to the difference between all forecasts and what happens.” (John Kay)

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