Business environment significantly worsened in December in Latvia

Data of business tendency surveys published January 8 by the Central Statistical Bureau (CSB) show that in December 2020 business confidence indicators dropped in all sectors.

Confidence indicators dropped slightly in construction and 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 is below zero for the second month

According to seasonally adjusted data, in December confidence indicator in retail trade comprised -11.7. As compared to November, this indicator has dropped by 5.6 percentage points. Already for the second month confidence indicators are negative and continue to reduce both in all sub-sectors of retail trade.

 The lowest indicators are in retail sale of automotive fuel and of non-food products. In retail sale of automotive fuel confidence indicator (-41.4) has even dropped below the lowest value (-39.5) experienced during the crisis in 2008–2009. It must be taken into account that part of enterprises had provided their answers already at the beginning of the month, when current strict retail trade restrictions were not valid yet.

Confidence indicator in services sector -20

In services sector in December 2020, according to seasonally adjusted data, confidence comprised -20.0. As compared to November, this indicator has dropped by 3.4 percentage points.

Very low confidence indicators that continue to reduce are in:

  • catering (-83.7 %),
  • accommodation (-82.8 %), 
  • travel agency and tour operator sector (-84.7 %).

Positive confidence indicators in December remained in computer programming (0.3 %) and in information services (5.4 %). On the background of other services sectors especially optimistic are providers of postal and courier activities (29.6 %). In this sector confidence has reached the highest value of 2020, which is affected both by seasonality characteristic to December and by rise in demand related to COVID-19.

Confidence indicator in construction is the lowest among all sectors – -22.5

In December 2020, confidence indicator in construction, compared to the previous month, has fallen by 2.3 percentage points, reducing to -22,5, which was affected by a more pessimistic assessment of entrepreneurs regarding level of construction orders. Confidence indicator decreased in civil engineering and specialized construction activities, but increased in construction of buildings.

Confidence indicator in manufacturing is rather stable

In December confidence indicator in manufacturing comprised -6.2 (0.4 percentage point less than in November), which was affected by even more negative forecasts of company managers regarding their own enterprise's activity for the next three months (expected fall in the production activity, fall in assessment of economic activity). As compared to the previous two months, business environment worsened regarding expected sale price of goods and development of employment in the following three months.

In December 2020 economic sentiment indicator comprised 88.1, which is 2.3 points less than in November. 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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