Weekly Economic Highlights: Larger-than-expected drop in economic sentiment index (ESI)

Weekly Economic Highlights: Larger-than-expected drop in economic sentiment index (ESI)

The economic sentiment index (ESI) dropped by 4.5 p.p. m-o-m in September, which was a bigger drop than expected (our estimate: -0.7 p.p.) and thus fell below the long-term average. Decrease of indicator was influenced by all five components: the most by drop in manufacturing confidence (2.5 p.p. contribution to the decrease), followed by services (-1.3 p.p.). Retail trade sentiment had a slightly smaller impact (-0.3 p.p.), as well as consumer sentiment (-0.3 p.p.) and sentiment in construction (-0.2 p.p.). Excluding the pandemic period, the last time the indicator was this low was in April 14. Confidence in manufacturing fell by 7 p.p. m-o-m, in retail trade by 6 p.p., and in services by 5 p.p. In the construction, it fell by 3 p.p. and the consumer confidence decreased by 1 p.p. In services (15), retail trade (15) and construction (13), the indicator remained above the long-term average value, while the consumer confidence indicator (-40) was well below it and the lowest since June 12. In manufacturing (-8), the indicator slipped considerably below the long-term average in recent month.

Weekly Economic Highlights: Growing trade deficit reflects the decline in the competitiveness of European production

Weekly Economic Highlights: Growing trade deficit reflects the decline in the competitiveness of European production

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

Weekly Economic Highlights: Leading indicators in global economy in search of a bottom

Weekly Economic Highlights: Leading indicators in global economy in search of a bottom

Global composite PMI fell below 50 in August (to 49.3; 50.8 in July), suggesting a slight contraction in the global economy, for the first time since June 2020. Volume of new orders contracted, world trade decreased, and the amount of excess capacity increased, which should at least alleviate price pressures. Five out of six sectors of the private economy registered declines (business services, consumer goods, consumer services, intermediate production and production of capital goods). Only the financial sector recorded slight growth. Declines were mainly present in developed economies (USA, Japan, Germany, Italy, United Kingdom), namely in both manufacturing and services. Economic activity picked up in India, Brazil and China. In world's 14 largest economies, employment increased, with the exceptions being China and Russia, where it declined. Services indicator fell to 49.2 in August, with services growing in China, the United Kingdom, India, Brazil, France, Italy, Spain, Australia, Kazakhstan, and Ireland. In USA, Japan, Germany and Russia, the volume of services provided decreased. Source: JP Morgan, S&P Global

Weekly Economic Highlights: Contraction in EA-19 manufacturing most pronounced in Germany

Weekly Economic Highlights: Contraction in EA-19 manufacturing most pronounced in Germany

Manufacturing PMI remained flat at 49.7, while the current output index fell from 46.5 to 46.3, which is expected to reflect a fall in industrial production in August, following a decline already in July. Price pressures in manufacturing are easing, which is not surprising given the drop in commodity prices. Among the larger economies in the euro zone, industrial production fell mainly in Germany and France, while it probably increased in other economies. Output fell mainly in the basic materials sectors and the automotive sector, where semiconductor shortages continue to limit production growth (but less sales as manufacturers focus on premium electric vehicles). Nevertheless, it is clear that the higher prices of electricity, natural gas and the shortage of semiconductors lead to greater imports of products from non-European countries, where the prices of energy products are lower, and the availability of semiconductors is better (Korean vehicle manufacturers).

Weekly Economic Highlights: June data suggest good performance of Slovenian economy in H1

Industrial production increased by 1.7% m-o-m in June, according to original data (+3.1% y-o-y), which was mainly due to the growth of in manufacturing (+2% m-o-m; +6% y-o-y). As it is usual for industrial production to increase in June compared to May, changes based on seasonally adjusted data were different. Thus, IP fell by 0.2% m-o-m, of which by 0.6% in manufacturing activities (92% of total IP). For the second consecutive month, drop was high in mining (7% in May as well as in June).

Weekly Economic Highlights: Stagnant world’s industrial production

Weekly Economic Highlights: Stagnant world’s industrial production

June data on trade of goods was mainly due to rising prices and higher turnover of trade goods that were not manufactured in Slovenia, as well as higher turnover (imports and exports) of energy products. June’s exports of goods (EUR 5.3 billion; more than EUR 1 billion above our estimate) were 57% higher y-o-y, while imports (EUR 4.8 billion) were 40% higher. Trade balance was positive in June. It amounted to EUR 0.5 billion, while a deficit was noted in all the previous five months of the year. This was due to higher exports of pharmaceutical products in Slovenia (part of them were stocked in Slovenia for some months), which influenced increased imports in the previous months. Exports of goods in the H1 were almost a third higher y-o-y (it amounted to EUR 25.5 billion), while imports increased by almost half (to EUR 27.7 billion). The deficit in goods trade in this period amounted to EUR 2.2 billion, and the export-import coverage was 92.0%.

Weekly economic highlights: US economy entered a recession, which is purely technical in nature

Weekly economic highlights: US economy entered a recession, which is purely technical in nature

US GDP shrank by 0.9% on an annualized rate in Q2 (this is not comparable to the year-over-year change as we know it in Europe), while it was down 1.6% in Q1. The drop was the result of reduced inventories (mainly at general department stores and motor vehicle dealers), investment in housing construction, lower federal and state consumption (lower needs due to the end of pandemic). Lower stocks had an impact of as much as 2 p.p. on lower GDP (than it would otherwise be), and housing investments for 0.7 p.p. in addition. Analysts had expected growth of 0.4% of GDP. On the other hand, household consumption increased, as did exports, which are actually key components of quality economic growth.

Weekly economic highlights:  Synchronous collapse of leading indicators among developed economies

Weekly economic highlights: Synchronous collapse of leading indicators among developed economies

The economic climate index worsened as expected in July (it fell by 1.7 index point to -1.1) and is now slightly below the long-term average, which reflects the slowdown of economic dynamics, and above all negative expectations of consumers and partly of manufacturing sector regarding business conditions in the coming months. The common denominator of these challenges is the high prices of energy products and raw materials, which reduce the disposable income of households. In manufacturing, the added concern is greater due to the danger of reductions in natural gas flows.

Weekly economic highlights:  Pharmaceuticals and electronic industry with high growth since the beginning of the year

Weekly economic highlights: Pharmaceuticals and electronic industry with high growth since the beginning of the year

Slovenia’s industrial production increased by 0.8% in May (as in the euro area), which was more than our estimate (+0.2%) and faster than in April (+0.4%). Although this data is less reliable, it nevertheless shows that solid data (data showing revenues, production) in the first half of the year has not deteriorated significantly. Production in manufacturing increased by only 0.2%. Sector of electricity, gas and steam supply contributed the most to the monthly growth, as it increased production by 5.1%. In mining, production fell by 7.7%, which mainly reflects volatile changes in the amount of mined lignite at Premogovnik Velenje. On a yearly basis, industrial production in the first five months was higher by 3.5%, of which in mining by 23% and in manufacturing by 5.1%. In the supply of electricity, gas and steam, it was lower by one-sixth, which reflects poor hydrology and thus low level of electricity production in hydro power plants.

Weekly economic highlights: China boosting again the global output

Weekly economic highlights: China boosting again the global output

J.P. Morgan Global Composite rose as expected in June (from 51.3 in May to 53.5), largely driven by an increase in manufacturing in China as the bulk of containment measures were lifted in Shanghai. PMI ex. China dropped from 53.9 to 53.1. World production thus increased in June after the decline in April and May. Growth in the service sector was the highest in the last four months. Growth was faster in business services and consumer goods manufacturing, while it moderated in consumer services. In Brazil, India and China, the value of the indicator was the highest (among the 14 large world economies), while its value strengthened the most in Japan, the United Kingdom and Brazil. The Chinese and Russian economies are recovering, while growth has slowed in all other economies. New orders rose for the slowest time since July 2020, while new export orders contracted for the fourth consecutive month. Source: S&P Global