Business environment worsened in retail and services sector in November

Data of business tendency surveys published November 30 by the Central Statistical Bureau (CSB) show that in November 2020, business confidence indicator has experienced a significant drop in retail trade and services sector.

Business confidence indicators characterize the 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.

Retail

According to seasonally adjusted data, in November confidence indicator in retail trade comprised -6.1. Compared to October, this indicator has reduced by 8.3 percentage points and, thus, dropped below zero – in August, September and October values were positive. Confidence indicators are negative both in retail trade of food and non-food products, where values of indicators were positive in October. Reduction is still observed in in trade of motor vehicles, motorcycles and their parts and accessories, as well as repair of motor vehicles and retail trade of fuel, where confidence indicator was already negative in October. Pessimistic forecasts of entrepreneurs regarding changes in economic activity of enterprises in the following months had the largest impact on the drop of confidence indicator.

Services

In services sector in November 2020, according to seasonally adjusted data, confidence comprised -16.6. As compared to October, this indicator has dropped by 4.9 percentage points. In the largest part of services sectors, compared to October, confidence indicators have reduced significantly. For example, in catering indicator has fallen by 36.0 percentage points, reaching negative value of -56.0. Significant drop, compared to October, was observed in accommodation (of 26.4 percentage points) and labor recruitment and provision of personnel (18.2 percentage points). Significantly low confidence indicators are still in travel agency and tour operator sector (-67.2) and air transport services (-70.8). Pessimistic forecasts of entrepreneurs regarding changes in demand for services they provide in the following months had the largest impact on the drop of confidence indicator. Still positive confidence indicator is observed in postal and courier activities (11.9), where, compared to October, there was even slight increase of 0.2 percentage points.

Construction

In November, confidence indicator in construction, according to seasonally adjusted data, was -20.2, which, compared to the previous month, has risen by 1.2 percentage points. In November, compared to October, assessment of entrepreneurs regarding level of construction orders slightly improved, but assessment regarding expected employment in the next three months – worsened. Confidence indicator slightly increased in construction of buildings, but reduced in civil engineering and specialized construction activities.

Compared to the previous month, the number of respondents indicating insufficient demand (31 % of construction enterprises surveyed) out of all factors affecting economic activity of construction enterprises has slightly decreased. But the number of enterprises indicating impact of weather (14 % of enterprises surveyed), lack of labor force (13 % of respondents), lack of materials or equipment (5 % of construction enterprises surveyed) as a restrictive factor has slightly increased. The number of respondents having indicated impact of COVID-19 (12 % of respondents) has grown by 2 percentage points. More by 3 percentage points than a year ago construction enterprises feel insufficient demand and financial difficulties and more by 4 percentage points – lack of materials or equipment. In turn, less than in November 2019 activity of enterprises was affected by weather (by 10 percentage points) and lack of labor force (by 6 percentage points). In November this year, economic activity of 31 % of construction enterprises was not affected by any restrictive factor.

Manufacturing

In November confidence indicator in manufacturing comprised -5.8 (0.1 percentage point less than in October), 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).

The largest drop of confidence indicator, compared to the previous month, was in such manufacturing sectors as manufacture of chemicals and chemical products, manufacture of wearing apparel, manufacture of food products and manufacture of wood and of products of wood and cork. In turn, confidence indicator significantly improved in manufacture of electrical equipment, manufacture of machinery and equipment n.e.c. and manufacture of basic pharmaceutical products and pharmaceutical preparations.

Compared to October, assessment of manufacturing enterprises regarding development of employment in the following months has worsened, but business environment regarding expected sale price of goods has improved.

In November 2020 economic sentiment indicator comprised 90.4, which is 1.9 points less than in October. 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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