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Business confidence fell in January in Latvia

Data of business tendency surveys published February 1 by the Central Statistical Bureau (CSB) show that in January 2021 business confidence indicators continued to decline.

Business confidence increased slightly in construction, dropped slightly in industry, but in retail trade and services sector there was a significant drop.

Business confidence indicators characterize general situation in the sector and they are acquired by carrying out business surveys in industry, construction, retail trade and services sector. If the indicator is above zero, business environment is positive, if it is below zero – business environment is negative.

Confidence indicator in retail trade has got closer to the lowest point of 2008

According to seasonally adjusted data, in January confidence indicator in retail trade comprised -15.8. As compared to December, this indicator has dropped by 4.1 percentage points. Already for the third month in a row, confidence indicators are negative in all sub-sectors of retail trade, and in trade and repair of motor vehicles. The lowest indicator (-32.9) is in retail sale of non-food products. It is lower than the lowest value of 2019, which was reached in April (-30.4), and got closer to the lowest value (-36.3) of economic crisis in 2008-2009.

Business environment was negative in almost all services sectors

In services sector in January 2021, according to seasonally adjusted data, confidence comprised -27.1. As compared to December, this indicator has dropped by 7.1 percentage point. Especially low confidence indicators still are in catering (-77.2 %), accommodation (-74.2 %), as well as in travel agency and tour operator sector (-50.9 %), however, compared to December, the indicator has improved in all three sectors.  In January positive confidence values are in insurance sector (9.0 %) and scientific research activities (5.4 %). On the background of other services sectors especially optimistic are providers of postal and courier activities (41.2 %).

Confidence indicator in construction sector rose by 1.3 percentage points

In January 2021 confidence indicator in construction was -21.2, which, compared to the previous month, has risen by 1.3 percentage points. Confidence indicator increased in all construction sectors – construction of buildings, civil engineering and specialized construction activities.

In manufacturing sector confidence indicator dropped by 0.5 percentage points

In January this year confidence indicator in manufacturing comprised -6.7 (0.5 percentage point less than in December), which was affected by even more negative forecasts of company managers regarding level of production orders. The largest drop of confidence indicator, as compared to December, was in such manufacturing sectors as manufacture of basic pharmaceutical products and pharmaceutical preparations, manufacture of other transport equipment, printing and reproduction of recorded media. As compared to the previous month, forecasts of entrepreneurs regarding their own enterprise's activity for the next three months (expected rise in the production activity, rise in assessment of economic activity) were more positive, as well as business environment regarding expected sale price of goods and development of employment in the following three months has improved.

In January 2021 economic sentiment indicator comprised 87.2, which is 1.8 points less than in December. Economic sentiment indicator characterizes general socio-economic situation in the country during a certain period of time (month), and it is calculated by the European Commission, Directorate-General for Economic and Financial Affairs for all EU countries according to a common methodology, taking 15 various seasonally adjusted components included in industry, construction, retail trade and services sector, as well as in consumer confidence indicator, as a basis.

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