Exports and imports of services increased by about a third y-o-y in the first four months of 2022. Among the most important groups of services, exports of travel (+EUR 390 m), transport (+EUR 205 m), other business services (+EUR 95 m; intellectual services) and telecommunications, computer and information services (+EUR 64 m) increased the most. Exports of construction services remained unchanged.
First estimates on the performance of private sector in the Q1 2022 showed that companies were not able to fully transfer higher prices of raw materials and energy into final prices, as gross margin decreased by 3 percentage points q-o-q to 22% (measured as share of value added in sales). It was at this level in 2018. In mining (-8 p. p.), energy (-10 p. p.) and in service activities (finance, professional, scientific and technical activities, healthcare), the declines were the largest. In manufacturing and trade, two sectors that otherwise generate the highest nominal added value and employ the most people, the gross margin fell by 1 p. p. Accounting for this fact it may sound odd how Slovenia’s was able to record positive GDP growth in the Q1 2022. This can be explained by high sales growth, which stems from price growth, which rose nominally much more than value added. But despite that real value added increased, albeit at lower pace. Despite the decline in gross margin, the share of labor costs in value added fell further (to 57% from 58% in the previous quarter), which means that labor costs grew more slowly than value added. The mentioned data does not provide other, quantitatively useful data. Source: Statistical Office of the Republic of Slovenia
The dynamics of trade in goods remained at a high level in April as well. Contrary to expectations, it even intensified. April exports of goods (EUR 4.2 billion; our estimate: EUR 3.9 billion) were almost EUR 1 billion higher than in the same month last year, while imports (EUR 4.7 billion) were EUR 1.4 billion higher. Year-on-year, exports of goods grew by 29% (24% in the first four months) and imports by 43% (48% in the first four months). The trade balance (difference between exports and imports of goods) remained negative in April (-EUR 570 million) and increased to EUR 2.2 billion in the first four months of the current year, which is extremely high relative to GDP (12% of GDP). In the coming months, we expect a slowdown in private consumption growth, as well as the effect of higher exports due to higher prices of industrial products, so we estimate that the monthly deficit will decrease dynamically. Source: Statistical Office of the Republic of Slovenia
As expected, the economic climate in Slovenia decreased slightly in May (-1.4 percentage points compared to April, our estimate: -1.5 p.p.). Change was negatively affected by fall in in manufacturing confidence (-0.9 p.p.) and consumer sentiment (-0.7 p.p.). The effects of services and construction indicators were positive (each contributed +0.2 p.p.). The confidence indicator in retail trade had no effect. Compared to May 2021, the value of the economic climate indicator was lower by 2.8 p.p. Compared to the long-term average, optimism was highest in construction (+36 p.p.), retail trade (+16 p.p.) and services (+8 p.p.). In manufacturing it remained higher, but only by 2 p.p.
Slovenia's GDP in the Q1 2022 was 0.8% higher in real terms than in the previous quarter (seasonally and calendar adjusted), which is a significant slowdown compared to the growth we have been accustomed to since the beginning of 2021. Nevertheless, growth can be described as extremely high, as it followed a 5.3% quarterly growth in the Q4 2021, and such growth is usually followed by a decline. Growth of 0.8% was also higher than in the EU-27 (+0.4%) and four times higher than our estimate (+0.2%). Quarterly growth was high in many European countries (Romania: + 5.2%, Portugal: + 2.6%, Austria: + 2.5%, Poland: + 2.4%, Latvia: + 2.1%) and that shows the March invasion of Ukraine has not yet had a major economic impact. The key reason was the strong growth in the European service sector.
April’s consumer prices (CPI) increased by 2.6% in one month, which was much higher than we expected (+0.9%). Higher prices of food (by 2.9%) and holiday packages (by 19.2%) contributed the most to rising monthly inflation, 0.5 percentage points each. In the group of food, prices of oil and fats increased the most (by 7%), followed by meat (by 6.3%), vegetables (by 5.2%) and bread and cereal products (by 2.9%). Electricity was also more expensive than in the previous month (by 11.6%), contributing 0.3 percentage points to inflation. Rising prices of clothing and footwear (by 3.8%) increased headline inflation by additional 0.3 percentage points. 0.2 percentage points were added by more expensive liquid fuels (by 20.4%).
The economic sentiment indicator in Slovenia stood at 4.3 percentage points in April and was 2.7 percentage points (p.p.) higher than in the previous month (1.6). Indicator was higher due to higher value of confidence indicators in services (by 1.3 p.p.), consumer sentiments (by 1.1 p.p.) and retail trade (by 0.6 p.p.). The impact of confidence indicators in manufacturing and construction was slightly negative (by 0.1 and 0.2 p.p., respectively). Source: Statistical Office of the Republic of Slovenia.
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 composite PMI in the euro area (the survey was conducted between 11 and 28 March) fell slightly in March (from 55.5 to 54.9). The service part of the economy, on the other hand, still experienced increased demand, as the services PMI remained high (slight increase from 55.5 to 55.6). In the European services sector, growth was highest in France (up from 55.5 to 57.4) and in Germany (up from 55.8 to 56.1), while in Italy it fell from 52.8 to 52.1.
March consumer prices (CPI) in Slovenia rose by 5.4% on annual level, which is an extremely high decline after the February growth (6.9%) and stems from a temporary, 3-month reduction in excise duties on electricity energy and cap on retail fuel as well as due to the high effect of the base (in March 2021, prices were already much higher than in February 2021, which means the effect of a growing base over time contributed to reduced growth as well). It is interesting to note that the March sub indicator within consumer confidence showed that this month a record share of households estimated that price growth will be even higher in the future. We can say that they were wrong, probably at least for the months of March, April and May 2022.
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