Release date 16 April 2022
The pessimism in Europe overshadowed by the optimism in the United States
The volume of industrial production in Slovenia in February was 8.3% lower than in the previous month (seasonally adjusted). It decreased the most in electricity, gas and steam supply, by more than half (-52.3%). This was influenced by the adoption of the Emergency Measures Act to mitigate the consequences of the impact of high energy prices (reduction of network charges on electricity) and the historically low water supply (no rainfall at all) which lowered production in hydropower plants. The real value of production was also lower in mining and manufacturing (by 4.4% and 2.3%, respectively). The volume of industrial production decreased on a monthly basis in all three main manufacturing product groups: in the manufacture of intermediate goods by 10.6% (this includes mainly the automotive industry and industries related to the manufacture of semi-finished products for export), in the manufacture of intermediate goods by 3.5% and in the production of consumer goods by 0.1%. In terms of technological complexity of production, production fell the most in medium high-tech sectors (-4%) in February, which includes the automotive parts and vehicles industry in important part, while it also fell in high-tech sectors (-1.6%), which includes primarily pharmaceutical industry. In low-tech sectors, it increased (+1.3%), mainly in the food production. In medium low-technology intensive sectors, it increased by 0.4%. More in the attachment.
Annual growth in loans to the non-banking sector (mainly to companies and households) rose to 7.9% in the Slovenian banking sector in February, while the volume of loans increased by EUR 171 million compared to the previous month. Annual growth in corporate lending was 8.7%, the 3rd highest among euro area countries. The largest contributors to growth were loans to companies in sectors of electricity, water supply and manufacturing. By purpose, loans to finance working capital and fixed capital formation strengthened the most. More in the attachment.
More economic topics are below in the attachment.
The ZEW indicator measures the sentiment of CFOs in the real economy. In the euro area, the April assessment of the current economic situation in the euro area fell again (-6.6 points), in Germany even more, by 9.4. It also declined in the US (-3.8), but US CFOs were still much more optimistic than others. In China, too, the situation has deteriorated sharply (-14.6 points), mainly due to a higher share of CFOs who assessed the situation as worse. The indicator of expectations is perhaps even more significant and has fallen by 4.3 in the euro area. In the US, it grew slightly (+1.4), and also strengthened in China, which means that CFOs in China expect the gradual withdrawal of containment measures. It is also very encouraging that a smaller share of CFOs than before expect that price growth will be even higher (a net quarter of them in the euro area believe that it will be higher, which is 15 points less than in March). They are most optimistic about the US (about declining inflation rate), which is probably due to falling oil prices. A much higher share of euro area CFOs expects short-term interest rates to rise (net 70%), compared to 93% in the US. In terms of sectors, the assessment of business conditions was the weakest in the automotive, steel and chemical sector. In IT, telecommunications and services, on the other hand, the situation is quite good. Source: ZEW Institute; the survey was conducted between 4th and 11th April 2022.
At its Thursday meeting (14 April), the ECB expectedly drew attention to the consequences of the war in Ukraine and the need to take these circumstances into account in its current and future monetary decisions. The market induced probability of an interest rate hike in July thus fell, with the euro-dollar exchange rate falling to 1.076, the lowest in two years, reflecting expectations of a much faster rise in US interest rates. At the May meeting, markets expect the FED to raise interest rates by half a percentage point. The ECB has confirmed that it will remain flexible when buying sovereign bonds, which is particularly relevant in the event of an increased credit spreads between countries. Source: ECB.
Knowledge flows and global value chains; Marta Bisztray and Niclas Poitiers; Working Paper; Bruegel; 13 April 2022. Available at: https://www.bruegel.org/2022/04/knowledge-flows-and-global-value-chains/
Comment/Abstract: The organisation of global value chains via supplier links and within business groups shapes global trade and forms a major channel through which knowledge is disseminated between countries. Global value chains are also an important channel through which economic shocks propagate. Trade and industrial policy can support productivity growth through global value chains by providing the right legal environment that supports the formation of long-term business relationships.
Economic climate, Slovenia, April 2022, (22 April), Statistical Office of RS; 0.5 (-1)
Comment: We expect this headline indicator to slip again a bit, mostly due to declines in manufacturing sentiment and retail sector. We don’t expect the consumer sentiment to decline further, which should be boosted by declining inflation and energy vouchers (EUR 150), that were just send to the accounts of beneficiaries. Services sector should remain quite optimistic.
“Great powers must be forever vigilant and never subordinate survival to any other goal, including prosperity.”
(John Mearsheimer)