Weekly Economic Highlights: Hard data largely defies survey pessimism

22_11_2022_Weekly Economic Highlights

Release date 22. November 2022

Hard data largely defies survey pessimism

On Slovenia's Economy

  • In the Q3, the real growth of Slovenian GDP decreased to 3.4% year on year (9.7% in the first and 8.3% in the second). Lower year on year growth was expected, but the drop compared to the previous quarter (seasonally and calendar adjusted) is surprising (-1.4%) given our estimate (+0.2%) and first estimate of GDP growth at EU-27 level (+0.2%). According to data available from Eurostat, the drop in Slovenia was the largest among the 14 countries for which data are available, while the median change was +0.25%. At first glance, the data was surprising also due to the fact that many business indicators were higher in the Q3 compared to the Q2 (industrial production, construction works, revenues from services, retail sales, etc.). During this period, household consumption increased by 1.2%, government consumption remained unchanged, and investments in fixed assets increased by 2.6% (of which the growth was particularly high in other buildings and facilities: +3.0 %). The growth of exports of goods and services strengthened from 2.6% in the previous quarter to 3.6%, and imports from 1.4 to 1.8%. The key and only component of GDP that contributed to the drop in GDP at the expenditure method was inventories, which decreased from EUR 874 to EUR 116 million. Inventories are a volatile item and fluctuated between EUR 50 and 400 m in the previous four quarters. This time, these inventories were associated with a drop in value added in trade (-11%), which can only be the result of a reduction in stocks in this sector, most likely in retail of crude oil derivatives, motor vehicles or distribution. According to the GDP production method, (real) value added in manufacturing increased by 1% q-o-q (+1.2% previously), in construction by 3.3%, in ICT activities by 2.3% and in other service activities by 1%. Value added dropped slightly only in professional, scientific and technical activities (-0.7%) among major sectors. Source: Statistical Office of the Republic of Slovenia

  • In September, 12% of employees in Slovenia worked from home at least one day a week; for men the share was 10%, and for women 14%. 15% of such employees were in services, and 6% in manufacturing. The share was highest among white collar workers – one sixth of employees in these professions worked from home at least one day a week. Among employees who perform physical or skilled manual work, share was at 2%. In September, due to covid-19, 40% of the population socialized less than they would otherwise. Compared to January, when the restriction of live socializing was most pronounced, this was 30 p. p. less. Residents aged 55 and over (45%) limited their live socializing the most, and the middle age group (35-54 years) the least, where just over a third (34%) did so. Source: Statistical Office of the Republic of Slovenia

  • More economic topics are below in the attachment.

On World Economy

  • The value of construction works in the EU-27 barely changed month on month in September (+0.2%) and was 1.4% higher year on year. On a monthly basis (compared to August, adjusted for season and calendar), growth was highest in Romania, Sweden and Hungary, while declines were largest in Poland, Portugal and Austria. By type of construction work, the growth was highest in civil engineering facilities (+1.5%), while building construction remained at a similar level. At the annual level, Romania and Slovenia stood out by far in terms of growth (+26% for both countries). The drop was greatest in Spain (-12%). Source: Eurostat

  • Industrial production (IP) in the EU-27 increased by 0.9% in September (year on year: +5.7%), with the largest increases in non-durable consumer goods (+3.1%) and capital goods (machinery and equipment; + 1.7%). It fell by 0.6% in the production of semi-finished products and by 2% in energy products. Among the larger EU-27 economies (volatility is high in the smaller ones), a 0.8% growth was a positive surprise for Germany (after a 0.7% decrease in the previous month), while in France IP fell by 0.7% after 2.7% growth in the previous months and that did not come as a surprise as well. Even in Italy, the 1.8% drop after 2.3% growth was not a surprise. Lower energy prices in Spain and Portugal did not affect the positive dynamics in these two countries as their IP fell by 0.4% and 2.5%. Source: Eurostat

  • More economic topics are below in the attachment.


Must Read of the Week

  • Wage-Price Spirals: What is the Historical Evidence?; Jorge Alvarez, John C Bluedorn, Niels-Jakob H Hansen, Youyou Huang, Evgenia Pugacheva, Alexandre Sollaci; IMF Working Papers No. 2022/221; November 2022. Available at: https://www.imf.org/en/Publications/WP/Issues/2022/11/11/Wage-Price-Spirals-What-is-the-Historical-Evidence-525073

Comment/Abstract:  Authors investigate how often wage-price spirals occurred and what happened afterwards by creating a database of past wage-price spirals among a wide set of advanced economies going back to the 1960s. They define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages. Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up. Authors conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.

Forecast of the Week

  • Economic climate index, Slovenia, November 2022, (24 November), Statistical Office of RS; -5.4 (-5.8 in October)

Comment: We expect economic climate index to improve in November, mainly reflecting better mood at consumer level and in manufacturing.               


Quote of the Week

“HDI is people-centered … GDP is commodity-centered.”

(Nobel-Prize-winning economist Amartya Sen)

Please see the enclosed attachment