Release date 14 March 2022
The first sentiment indicators in the real economy already indicate the negative impact of geopolitics
In January, industrial production remained almost unchanged to December (seasonally adjusted) and was higher only by 0.1%. Quite surprising, growth was highest in electricity, gas and steam supply (+18%). It decreased by 0.9% in manufacturing (a modest growth of 0.5% was expected according to our view) and in mining and quarrying by 0.6%. Most of the industrial production in Slovenia is represented by manufacturing (90 %), where revenues nevertheless increased by 3.1% (despite drop in industrial production). The decline in production in manufacturing was largely influenced by the decline in production in durable consumer goods (-14.7%), where we estimate that it due to falling production of pharmaceuticals. In production of investment goods (machinery and equipment, semi-finished products), production grew by 0.9% but revenues fell by 5.3%. This was also due to slightly higher inventory growth (+3%). Measured by technological complexity of production, the decline in the category of high-tech production sectors was the largest (-5.7%), which confirms our conclusion (pharmaceutical and electronic products are here the most important). In low-tech production sectors, the decline was 2.3%, while in medium-high (+0.6%) and medium-low (+2.7%) technology sectors they even recorded growth. Compared to December (note: data are not seasonally adjusted), changes in industrial production by subsectors in manufacturing were high and also reflected the seasonal nature of production in certain activities. Growth was high on a monthly level in the production of metals (+38% m-o-m; +9% y-o-y), textiles (+31% m-o-m, +10% y-o-y), rubber products (+17% m-o-m; +2% y-o-y), electrical appliances (+16% m-o-m; + 6%y-o-y), metal products (+14% m-o-m; +17% y-o-y) and non-metallic mineral products (+10% m-o-m; + 18% y-o-y). Despite declining on a monthly basis, annual growth was high in beverage production (+52%; data is less reliable), other miscellaneous business activities (+35%), wood processing (+20%) and motor vehicle production (+17%). At the annual level, only the production of leather products was lower (-39%), due to the stoppage of production in certain companies and in sectors of other vehicles and vessels (-21%) and clothing (-3%), which are less important sectors..
In January, Slovenia exported EUR 3.5 billion (our estimate: EUR 3 billion) and imported EUR 3.9 billion goods; exports were 20.5% higher than in January 2021 and imports 52.1%. In January 2022, an extremely high trade deficit was recorded. It amounted to EUR 0.4 billion, and the coverage of imports by exports was 89.2%. Exports to the EU countries were 28.8% higher than in the January 2021, while imports were 38.0% higher. The value of both exports and imports in January 2022 to these countries amounted to EUR 2.4 billion. Slovenia generated 68.5% of the value of total exports and 60.9% of the value of total imports with EU countries. Exports to non-EU countries were 5.7% higher than in the previous year, while imports from these countries were 80.6% higher. The value of exports to these countries amounted to EUR 1.1 billion in January, while the value of imports from there amounted to EUR 1.5 billion. In our opinion, this reflects the high growth of prices of raw materials, energy and semi-finished products, where the importance of raw materials in the final price is high..
More economic topics are below in the attachment.
The PMI in the global electronics industry fell in February (from 56.3 to 54.8) to the lowest value in the last 15 months. Current growth in production and new orders slowed down. The index fell due to slightly weaker demand, a shortage of raw materials and the lack of employees (this was more pronounced in Asia). As in other sectors, bottlenecks are slightly reduced. Cost pressures remain high as commodity prices on international markets have risen, while transport costs have risen. In February, around 28% of world producers raised their prices (only 1% lowered them), which was slightly less than in January.
Global growth: drivers and post-pandemic prospects; Gabriela Nodari, Daniel Rees and Phurichai Rungcharoenkitkul; BIS Quarterly Review; 28 February 2022. Available at: https://www.bis.org/publ/qtrpdf/r_qt2203b.htm
Comment/Abstract: Experts at BIS highlight the urgent need to accelerate structural reforms to provide a boost to aggregate supply. Without such measures, the dual headwinds of sluggish labour productivity growth and population ageing could weigh on GDP growth in the medium term. Slower growth would have wide-ranging macroeconomic implications – not least for debt sustainability, macroeconomic stabilisation policy, inflation and therefore for monetary policy, which would have to deal with a more challenging environment. Analysis suggests that countries have scope to enhance productivity growth regardless of their industrial structure. Country-wide factors have historically mattered more for aggregate productivity growth than industry-specific ones. This suggests that economy-wide measures, such as improvements in institutional quality and human capital, can persistently boost labour productivity growth, even in economies geared towards seemingly less productive industries. Measures to promote labour market flexibility and resource reallocation are also likely to be beneficial. More agile economies would be more resilient in the face of large economic disruptions, such as those associated with the Covid-19 pandemic discussed in our scenario analysis, and in some cases may even benefit from the attendant shifts in consumer preferences. Their scenario analysis also underscores the importance of guarding against downside risks. Improving financial resilience against a house price correction and forestalling housing market overheating requires coordinated monetary, fiscal and macroprudential policy action. Promoting an orderly green transition, and the major resource reallocation it implies, requires a broad policy strategy, including international coordination. Lack of progress on these fronts could come at a high cost.
Industrial production, EU-27, January 2022, (15 March), Eurostat; +0.6%
Comment: We are more optimistic than median forecasters at Refinitiv (+0.2%) as of Friday, March 11. This is due to higher PMIs in manufacturing sector and apparent reduction in bottlenecks.
“All war is a symptom of man's failure as a thinking animal.”
(John Steinbeck)