Thursday , August 11 2022

The industry has been the weakest bear since 2014. How do economists explain this?


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According to data from the Central Bureau of Statistics, in the nine months of the previous year, production of industrial production in Latvia increased by 2.5% at constant prices, according to calendar adjusted data. As economists have proven, explained and interpreted, how do you rate this indicator?

Swedbank Economist Linda Vildava: Manufacturing continues to grow slowly

After a slightly faster increase in August, production growth in production declined slowly to 2% compared to the previous year (according to calendar adjusted data).

In September, volumes in the food industry continued to decline, while the growth rate declined to two-digit heights for automobiles, trailers and semi-trailers. The wood industry continued to grow quite well at 6%.

Manufacturing production grew by 3.1% in the nine months of this year.

The Eurozone manufacturing procurement managers' index stated that the slowdown in growth will continue at the start of the fourth quarter due to slowing economic growth, trade tensions, political uncertainty and rising costs.

Even worries about a possible decline in the euro-zone manufacturing industry by the end of the year are even worse if the situation does not improve. Some of the signs indicate that the insecurity of the eurozone manufacturing industry may have been abandoned by the Latvian entrepreneurs.

While insufficient demand is almost always the most important limiting factor for production, the importance of this factor has declined continuously in the last two years. Over the past year, most entrepreneurs have said there are no barrier factors in production.

However, recent data show that the proportion of companies that realize that the importance of insufficient demand has increased a little, but there is no disturbance in production.

Despite slower growth and falling volumes in some sub-sectors, the manufacturing industry continues to grow and contributes positively to the Latvian economy. Downside risks for future growth.

Luminor's economist Peter Strauti güçlüš: Industrial development becomes a theater for viewers with strong nerves

Production output decreased significantly in September – down 1.5% compared to August, but annual growth was down 2.0%.

The reasons for this can be found both in relation to the brightest sectors and depending on the inin industry böl sector, both for the growth of the industrial zone and for the weak growth of the manufacturing industry and the sub-sector.

In September, the largest sector is generally strong – woodworking (+ 6.1% a year), but overall food processing (-1.7%) was weak. This year's major industrial development has been mechanical engineering. In September, this sectoral group was the theater of a single actor.

The annual rate of increase in the production of electrical equipment was extremely high at 35.6%, exceeding 20.5% compared to the previous year. In the same way, it is also valuable in the production of automobile parts – in September it increased by 8.6% compared to September and increased by an average of 28.1% annually.

On the other hand, there was almost no increase in machinery and equipment production (0.8%) in September, even in the electronics sector (-4.9%).

Since large companies in this sector are planning to expand, we can easily predict that there has been a very rapid recovery in the production of auto parts. On the contrary, the risk of slow growth in machinery and machinery production is important.

Only one of the Top 6 companies (Caljan Rite Hite) has achieved steady and rapid growth over the years and has prepared ambitious expansion plans by taking over the old buildings of Metallurg.

Electronics has been the theater of a single actor for a long time, because its dynamics are strongly dependent on a company that is generally very successful, but the major lines of history tend to be straight and honest.

Stellar "syndrome" also takes over the food industry sub-sectors. In the milk processing sector, the Food Association increases its share through the transfer of other companies. Rapid organic growth of about half of the grain production allowed its share to rise to Dobele Dzirnavnieks.

However, this concentration concentrates on the rapid development of a company (Karavela) and the crisis of other manufacturers, the fastest way to process fish. This situation cannot overcome the results of the embargoes on the stolen of Russia. The company's management estimates that Karavela already produces more than half of the total amount of canned fish.

Furniture production is not very intense, but also the share of three industry leaders – SWF, Kvist and Dailrada – is growing steadily. Pharmacy is the tandem of the two leaders whose long-term success has varied, but the long-term development curve is upward.

In general, this concentration of force is favorable. A large scale in the sector is a positive factor in productivity growth. These companies have the money and human resources to catch the export markets, they can afford to be patient.

The success of Caravel enables us to predict that the three-year recession in fish operation will be overcome within a few years. Last year, the company's turnover grew by 63% to 38.7 million. This year will exceed 40 million, and the company is currently repairing its facilities for the installation of additional equipment.

Of course, there are risks. The problems of a company can have a major impact on the results of the whole sector, as we see now. However, there are three large sector / sector groups – in relation to food, wood and metal + machines, they often have strong teams of many powerful actors.

In addition, the manufacturing industry as a whole is about 13% of the total value added and exports are increasingly helping the service sector. While the industry is decreasing this year, the export performance of the services is very good.

"Citadele" economist Mārti Letonyaš tenboli #š: Since September 2014, Latvia was the weakest bear in the industry.

September this year has been the weakest month of the Latvian industry since 2014, and according to data released by the Central Bureau of Statistics, the amount of production in the Latvian industry decreased by 1.2% compared to the same month of the previous year.

This relatively unexpected downturn in September was due to the one-off period in which the volume of production in the energy sector fell by 12.6% in September. However, there are no encouraging trends elsewhere in the industry, and production production in September only increased by 2%.

This year, it lags far behind the overall economic growth of the economy, unexpectedly reaching 5% in the third quarter.

The biggest impact of industrial producers in September was the fall in the energy sector due to the high increase in electricity generation in hydroelectric power plants in Latvia due to the high rainfall in autumn and the increase in electricity production. This year, CHP could not compensate even for 80% increase in electricity production in its facilities.

In the coming months, this impact will not be so evident, and so the industrial production in Latvia will improve over the remaining months of the year.

However, the manufacturing sector, where the production volume increased by only 2% in September compared to the previous year, is a further concern. The sector is largely dependent on exports and the situation in the world economy is no longer as happy as it was at the end of last year and at the beginning of this year.

In the third quarter of this year, the economic growth in the euro zone fell below the figures pointing to global trade contraction at the end of this year, and in Latvia at the end of this year almost all of the manufacturing industry was provided by only three sectors: woodworking, electrical equipment, automobiles and production of auto parts.

Compared to the same month of the previous year, wood processing grew by 6.1%, electrical equipment by 35.6% and cars by 8.6% in September.

The increase in production in wood processing may have contributed to a certain extent due to the rapid increase in wood prices since last year, but since August the timber prices on the other side of the Atlantic have started to show a sharp drop, leading to a 39 means they can feel.

At the same time, in September, the manufacturing industry suffered from equipment production (-1.7% compared to the previous year), computers and optical equipment (-4.9%), and equipment installation and (-17.2%) equipment.

Looking at the remaining months of this year and next year, I am very prudent about the expectations of the manufacturing industry. The sector is increasingly facing a rapidly growing imbalance between wages and productivity. This has a negative impact on industry profits and has the ability to invest in development.

At the same time, the external environment is not as favorable as ever before, and in recent months, the pace of industrial growth has slowed down in Lithuania and Estonia and elsewhere in Europe.

Therefore, this year and next year, the growth of production in Latvia is likely to be slightly above 3%, and therefore the growth of the Latvian economy will be more dependent on internal factors over time.

FM: Industrial decline in September, while manufacturing continued to grow

The latest statistics show that industrial production in Latvia decreased by 1.2% in September this year compared to September of the previous year.

However, the growth recorded in the last two months was high enough to achieve positive growth in the third quarter of 2018 and industrial production increased by 3% compared to the third quarter of last year.

Industrial growth in last September largely stemmed from the strong increase in electricity and gas supply, but this year the situation was reversed and the decline in industrial production stemmed from the decline in this sector.

If the energy sector grew by 37.4% in September compared to the previous year and created a high base this year, electricity and natural gas supply decreased by 12.6% in September this year.

The decline in the sector was determined by the rapid decline in electricity production in hydroelectric power plants (- 84.1%). This figure was affected not only by the high base years of last year, but also by the dryness of atypical in September. As a result, the water supply in Daugava was particularly low.

On the other hand, the production of CHP plants in September increased by 79.6 percent compared to the previous year, but these amounts were not sufficient to offset the weak performance of hydroelectric power plants.

At the same time, manufacturing production increased by 2.0% compared to September of the previous year. The situation in the sub-sectors has changed but is broadly similar to the developments observed in previous months.

In the coming month, the increase in production was determined by the wood industry, the largest sub-sector, by 6.1% in September.

There has been a good growth in September in some branches of the mechanical engineering sector. For example, the annual output of electrical equipment increased by 35.6%, while the production of automobiles, trailers and semi-trailers increased by 8.6%.

At the same time, the rate of growth in the production of machinery, machine and machine tools decreased, but in September alone rose by only 0.8%.

At the end of this year, it should be noted that one of the largest companies in this sub-sector of the SIA ini Trelleborg Wheel Systems Liepaja “plans to complete a production expansion project by creating a wheel center production center with more than 100 employees in the next two years.

Considering the fact that there are various stable and exportable mechanical engineering companies at Liepaja, the preconditions for further development of the city's industry are positive.

In September, the increase in production volume was also recorded in textile production (+ 4.7% per year), chemical and chemical products (+ 4.5%), rubber and plastic products (+ 4.3%) and others. Sub-sectors with lower volume growth rates.

Respectively, shrinkage was observed in the production of food products. In September, the decline of 1.7% in the production of this sub-sector was determined by the production of dairy products, which have been declining since November last year.

At the same time, leading dairy producers in Latvia are preparing a report on ambitious investment plans that need to be reflected in milk production data by changing the trends observed so far in the near future.

For example, the Food Association invested € 2.4 million to purchase four new production equipment, JSC Prei "u siers planned to invest 8m euros in the Cheledar production line, investing in the expansion of the JSC "Tukuma piens" facility and developing its ecological product range. JSC plans to invest more than about 10m euros in the modernization of the "Smiltenes pirates", almost one million euros.

A decline of 4.9% in September 2018 was also attributed to the production of computers, electronics and optical equipment.

Last week, the European Investment Bank's long-term financing of € 10 million, planned by the Latvian electronics company AS HansaMatrix and aimed to support investments worth € 20 million in the period from 2018 to 2020 We heard your decision.

They are expected to contribute significantly to large investments and the development of the high-tech industry in Latvia. In September this year, production volumes, beverages and clothing production, printing and reproduction of records, equipment and equipment repair also fell.

Related Articles

The economic confidence of Latvian businessmen in October this year improved slightly. It should be noted that the confidence level is relatively high throughout the year.

On the other hand, the economic outlook of the European Union and the euro zone declined in October, but in September the growth of the Latvian production production in the euro area was stronger than the growth in the domestic market and outside the euro zone. We can conclude that the demand for industrial products produced in Latvia remains in the largest output market. determined.

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