Release date 19. September 2022
Growing trade deficit reflects the decline in the competitiveness of European production
July data on the balance of payments were worse than expected. We estimated that in that month Slovenia would record a slight surplus in the current account (EUR 5 m), mainly due to higher increase in the export of services, but the overall deficit (EUR -102 m) was high. The balance of payments reflects cash flows between Slovenia and abroad and, in this context, means a net outflow of cash abroad. The deficit was particularly large for goods (EUR -248 m) and was primarily due to much higher growth in imports (EUR +1 bn) than exports (EUR +650 m) in one year. The surplus in services increased from EUR 185 m to EUR 332 m in one year, which was due to higher growth in the export of services (mainly travel). The deficit in primary incomes (from work, etc.) was similar as in last year (-113 m EUR), but in secondary incomes, the deficit increased (from EUR -25m to -74 m), mainly due to the growth of expenditures. In the first seven months, the current account deficit stood at EUR -283 m (in the same period in 2022: EUR 1,459 m surplus) and was mainly due to deficit in goods (EUR -1,371 m), followed by deficits in primary incomes (EUR -485 m) and secondary incomes (EUR -351 m). The surplus in services was EUR 1,924 m, compared to EUR 1,218 m in previous year. About 80% of the surplus in services can be attributed to EU-27 countries. In the case of goods, the high deficit was the result of worsening terms of trade and higher imports of consumption and investment goods (greater growth in imports than exports), especially with Austria, Germany and Russia. Among the larger countries, Croatia, Serbia, the UK and Switzerland had a positive contribution to deficit. Data on the BOP exports of goods (data from the balance of payments are slightly different from data from the Statistical Office of the Republic of Slovenia) show that it slowed down in July (the change in July was lower compared to the cumulative change in the seven months of the year), especially to Italy, Austria, Croatia, Slovakia, BiH and Serbia. On the other hand, exports to Russia (+56% in July, +19% cumulatively), EFTA countries (+45% in July, +25% cumulatively, of which mainly to Switzerland), Germany (+22% in July, +12% cumulative) and Poland (+23% in July, +19% cumulative) increased more. The above data show that it was mainly the greater export of pharmaceutical products and active ingredients that contributed to this country dynamic. Source: Bank of Slovenia
More economic topics are below in the attachment.
In August, we expected a drop in USA monthly inflation due to the large drop in price of fuels (-10.6%), but despite this effect, it rose by 0.1% m-o-m and was 8.3% higher in one year. Higher prices of shelter (+0.7%), food (+0.8%) and medical services (+0.8%) contributed the most to monthly price growth. Despite lower fuel prices, the prices of natural gas (+3.5%) and electricity (+1.5%) rose. The prices of new vehicles rose by 0.8%, mainly due to the rise in the prices of semi-finished products and raw materials, while the prices of used vehicles are only slowly decreasing (-0.1%). Core inflation increased by 0.6% m-o-m (6.3% y-o-y), which is one of the key indicators that determines the direction of the FED regarding future interest rate hikes. Source: U.S. Bureau of Labour Statistics
In July, EU-27 recorded a EUR 42 bn deficit in goods trade with third countries (in June: EUR 34 bn and in July of the previous year EUR 16 bn surplus), which was mainly due to lower export and higher import growth, as a consequence of higher price growth of energy products (especially fossil fuels). Exports to markets outside the EU amounted to EUR 212 bn (EUR 225 bn in June), which was only 13% more than in July last year (June’ annual growth was 20%). Imports of goods, on the other hand, were still higher by half (increase from EUR 172 to EUR 254 bn). The value of trade within EU-27 amounted to EUR 342 bn, which was 22% more y-o-y. This data shows that the growth of imports remained high in nominal terms (mainly due to the rise in prices, with a more moderate increase in imported quantities), while the growth of exports began to slow down. Source: Eurostat
A Snapshot on the Characteristics and Dynamics of Austrian Exporting Firms; Bernhard Dachs, Robert Stehrer and Maria Yoveska, wiiw Research Report No. 462, September 2022. Available at: https://wiiw.ac.at/a-snapshot-on-the-characteristics-and-dynamics-of-austrian-exporting-firms-p-6308.html
Comment/Abstract: In view of the importance of the export economy for Austria this study examines the role and characteristics of Austrian exporting firms compared with non-exporting firms. Specifically, it assesses how the share of exporting firms has developed in recent years, whether exports have become more important for firms over time and to what extent exporters have an advantage over other firms (export premium). The results show that about two third of the Austrian manufacturing firms are engaged in exporting activities and indicate that – in line with existing literature - exporting firms are larger, more productive, generate higher surpluses, invest more, and spend more on environmental protection than non-exporters. Further, the results highlight that only a small number of firms account for a large share of Austrian manufacturing exports. Finally, the results point towards a mutual positive relationship between export behaviour, productivity, and R&D expenditures.
Industrial production, EU-27, July, (14 September), Eurostat; -1.6% m-o-m
Comment: After a 0.6% growth in June, July is probably the first month in a raw of several months, when industrial production is expected to decline across EU-27. High energy costs are the main reason for declining production.
“Maybe it is the last chance for Europe to influence standards for world trade. Next it will be between the US and the Asia-Pacific region (WEF, 22nd of January 2015).”
(Sigmar Gabriel)