Central Statistical Office reports improving business environment in Latvia – Baltic News Network
In January 2022, business confidence indicators were positive in the retail and services sector, while in industry and construction, although improving, business confidence indicators were still negative.
Business confidence indicators characterize the general situation of the sector and are acquired by conducting business surveys in industry, construction, retail trade and services. If the indicator is above zero, the business environment is positive, if it is below zero, the business environment is negative, according to data from the business tendency surveys conducted by the Central Bureau of Statistics.
After a three-month period at the end of 2021 where retail business confidence indicators were negative, in January 2022 the retail confidence indicator rebounded to a positive level of 1.3. Compared to December, this indicator improved by 2.5 percentage points. Compared to the previous month, business confidence indicators improved in the retail trade of non-food products, the trade, repair and maintenance of motor vehicles and motor parts and the retail trade of fuels. In January, food retail entrepreneurs were the most pessimistic, with a confidence index of -12.5, down 4.3 percentage points from December.
In January, 14% of merchants said they did not perceive any constraints on their commercial activity. This figure is down two percentage points from December. 11% of merchants indicate that their business activities are severely constrained by financial difficulties. In January, this figure reached its highest level in two years. The impact of Covid-19, on the other hand, was noted by 44% of respondents as a significant factor limiting economic activity, and this indicator did not change significantly compared to December. In January, respondents also mentioned rising energy prices and various logistical problems as constraints to economic activity, but this share of respondents is still insignificant.
Also in the services sector, the seasonally adjusted confidence indicator in January 2022 is positive (4.3) and the business environment for entrepreneurs improved by 5.0 percentage points compared to December. As usual, confidence indicators vary widely across service industries and trends in these indicators also vary depending on industry specifics, seasonal impact and the extent of the impact of the Covid pandemic. -19 on the sector.
In January, the most pessimistic were entrepreneurs in the accommodation and food services sector, where the confidence indicators were -41.4 and -56.7 respectively.
In accommodation, the indicator increased by 23.6 percentage points compared to December, while in the restaurant sector, this indicator deteriorated by 2.4 percentage points. The third particularly pessimistic services sector in January is security and investigation services, where the confidence indicator reached its lowest value at -56.7 for the year. On the other hand, the most optimistic business environment in January is found among providers of financial services (22.0) and insurance (40.7), as well as entrepreneurs in computer programming (20.4) and legal and accounting services (20.0). In the postal and courier sector, which in December showed the highest value of the confidence indicator in the services sector, it fell by 19.1 percentage points in January and now stands at 16.7 . Overall, the business environment in January was positive in 16 services sub-sectors and negative in 12. In two sectors, the confidence indicator was zero.
29% of respondents in the service sector did not experience any factors limiting economic activity in December. This represents an increase of two percentage points from November. The share of respondents indicating that the effects of Covid-19 are a significant limiting factor for the success of their commercial activity remained stable at 28% for the third month.
The seasonally adjusted construction confidence rate for January is -5.6, up 7.7 percentage points from the previous month. Although still negative, the indicator reached its highest level since June 2019, when the construction confidence indicator stood at -4.4. Compared to December, entrepreneurs’ assessment of the level of orders in the construction sector improved slightly in January, and expectations for the development of employment over the next three months were also more optimistic . The confidence indicator rose in all construction sectors – in building construction, civil engineering and specialized construction activities.
In January, the construction sector was the most affected by bad weather (reported by 46% of respondents, two percentage points more than in January last year). Insufficient demand remained the second most frequently mentioned factor limiting business activity (stated by 31% of respondents), up two percentage points from the previous month. The share of companies whose economic activity has been limited by financial difficulties has decreased by two percentage points (indicated by 12% of respondents). The negative impact of Covid-19 was seen by 7% of businesses in January, one percentage point less than in December. 18% of construction companies surveyed were not affected by any limiting factor in January (a six percentage point increase from the previous month).
The manufacturing confidence indicator improved by 0.7 percentage point in January compared to December and stood at -1.0. This is explained by a more positive assessment of the current level of orders by business leaders and optimistic forecasts for their business activity over the next three months (expected increase in production activity, increase in ‘economic activity). The largest increase in the confidence indicator, compared to the previous month, was recorded in manufacturing industries such as manufacturing of other motor vehicles, repair and installation of machinery and equipment, manufacture of paper and paper articles, manufacture of motor vehicles, trailers and semi-trailers, manufacture of wood and wood and cork products, and manufacture of metal products, except machinery and equipment. In turn, a drop was recorded in the other manufacturing industries, the manufacture of electrical equipment and the manufacture of basic pharmaceutical products and pharmaceutical preparations.
Compared to December, the number of respondents citing insufficient demand as a factor limiting production fell slightly, while the impact of labor shortages increased (both factors were cited by 28% of entrepreneurs surveyed ). The impact of Covid-19 was reported by 10% of companies surveyed in January (unchanged from the previous month). Other factors limiting production include rising electricity and raw material prices. 30% of manufacturing companies surveyed were not affected by any limiting factors in January.
In January 2022, the economic sentiment indicator was 99.3 (99.9 the previous month). The economic sentiment indicator characterizes the general socio-economic situation of the country for a certain period of time (months) and is calculated by the European Commission, Directorate General for Economic and Financial Affairs for all EU countries according to a methodology common index, taking 15 various seasonally adjusted components included in industry, construction, retail trade and the service sector, as well as the consumer confidence indicator, as a basis. The main contributor to the decline in the monthly economic sentiment indicator for January was pessimistic consumer sentiment.