Release date 11 September 2021
In five industrial sectors, the growth of industrial production was above 25% y-o-y
Compared to the previous month, July’s growth of industrial production was negative (-1.7% vs our estimate: -1.0%), while year-on-year (compared to July 2020) it was 8.9% higher. As expected, growth slowed down (it was 15% higher year on year in the 1H 2021) to 13% in the seven months of 2021. In mining, industrial production was down 2.6% year on year in the same period, in energy by 1.5%, but in manufacturing it was higher by about 15%. If industrial production remains at the July level for the rest of the year (it is quite likely that it will even grow), the growth for the whole year will be around 9%, which is well above the central estimate of independent forecasters (Eastern European Consensus: 7.5%). The highest growth in industrial production in the seven months was recorded by the following manufacturing sectors: other miscellaneous activities (+29%), manufacture of textiles (+28%), electrical appliances (+27%), repair and installation of machinery (+27%), manufacturing metal products (+ 25%) and manufacture of rubber and plastic products (+ 24%). Only the production of leather and leather products (-21%) and mining and quarrying (-1.6%) recorded a decline. Compared to the same period in 2019, industrial production was at least one tenth higher in 5 sectors: manufacture of furniture, other machinery and equipment, electronic and optical products, chemicals, chemical products and in wood processing. It was lower than this level only in manufacture of motor vehicles and trailers (-14%), manufacture of other vehicles (-9.4%), non-metallic mineral production (-8.7%) and manufacture of leather and leather products (-38%). The latter is related to an almost closure of an important production plant in the field of leather products for various industries.
In July 2021, exports of goods from Slovenia amounted to EUR 3.5 billion (+ 17% more than in the same month last year), which was completely in line with our expectations and more than in June (EUR 3.3 billion). In the seven months of 2021, it was higher by almost a fifth or EUR 3.6 billion. The high growth of household consumption and the strengthening of construction investments (currently mainly stocks, but the investment is recorded at the end of the project) further accelerated imports, which were only EUR 180 million lower than exports in the period. Import was higher by one fifth. The relative growth of imports from EU countries (+23%) was lower than from non-EU countries (+30%) but in absolute numbers (which is a much more important criterion) the growth was higher from EU countries (EUR 2.8 billion compared to EUR 1.7 billion).
A closer look at individual consumer prices in August shows that food prices were 1% lower in the eight months of the year compared to the last year. This was mainly due to lower prices of fruit (-4.3%, in August only they were even lower by 12.8% year on year), milk, cheese and eggs (-1.3%), meat (-1.1%) and sweet program categories (-1.7%). Prices in the category of alcoholic beverages and tobacco were higher by 3.7%, mainly due to the increase in excise duties on tobacco. Prices of clothing and footwear were 0.4% lower (of which footwear was even 3% lower). Households paid 4.4% more for housing, water and electricity costs, and 1.3% more for housing and household equipment. In the healthcare category, prices were higher by 2.1%. In the transport category (+3%) the prices of used cars were lower by 6.3% and the prices of new cars by 3.1%. Costs in the category of communications remained almost unchanged, while for recreation and culture typical household paid on average 2.8% less. In education, prices were 0.9% higher, while 1.6% more was paid for services in restaurants and hotels.
In Asia, the best-performing sectors in August were pharmacy and biotechnology, insurance, and real estate. Only 5 of the 18 sectors recorded growth. The construction materials, consumer services and paper sectors faced large declines. A key reason for the poorer August picture in Asia is the spread of COVID-19 infections, leading to logistical bottlenecks and restrictions on the use of certain personal services.
Purchasing activities at major consumers of aluminium, copper and steel slowed considerably in August, which nevertheless implies that they recorded growth in production and orders, but this is, for example, the lowest in the last 6 (copper) to 14 months (steel). Among copper consumers, American and Asian were still very optimistic, and European companies recorded the weakest sentiment since the beginning of the year. It was different with steel. European and American steel consumers recorded significantly more orders than Asian ones.
The Fed takes on corporate credit risk: an analysis of the efficacy of the SMCCF; Amat Simon Gilchrist, Bin Wei, Vivian Z. Yue and Egon Zakrajšek; BIS Working Papers, No 963, 9 September 2021; available at: https://www.bis.org/publ/work963.htm
Comment/Abstract: Authors found that the Fed announcement of SMCCF on 23rd March 2020 and expansion of the programme on 9th April significantly reduced credit and bid-ask spreads and that this appears to have had little to do with whether or not a particular bond was eligible for purchase by the SMCCF. The narrowing of credit spreads was due almost entirely to a reduction in credit risk premia, as opposed to a reduction in default risk. The Fed's forceful response to pandemic-induced turmoil in financial markets shored up investor confidence and improved market sentiment, effectively forestalling fire sales and stabilising conditions in the market well before the Fed bought anything. Their results indicate that the Fed's actual purchases of individual corporate bonds had negligible effects on credit and bid-ask spreads.
Exports of services, Slovenia, July 2021 (Bank of Slovenia): EUR 780 million
Comment: we expect monthly exports of services to reach 90% of the pre-crisis level (July 2020). Foreign tourism somehow rebounded due to relaxation of measures to travel.
“The differences between forecasts are trivial relative to the difference between all forecasts and what happens” (John Kay)