Business Entrepreneurial mood improved in June / Article / LSM.lv

Entrepreneurial mood improved in June / Article / LSM.lv

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Business confidence indicators in June this year, when the state of emergency declared in connection with the spread of Covid-19 in the country ended, have improved compared to May, although they are still negative, according to surveys conducted by the Central Statistical Bureau (CSB).

Business confidence indicators describe the general situation in the sector and are obtained by conducting business surveys in the industrial, construction, retail and service sectors. If the indicator is above zero, there is a positive business environment, if below zero – a negative mood of entrepreneurs, the CSB explained.

According to seasonally adjusted data, the retail confidence indicator in June was -14.2, which is an increase of 8.3 percentage points compared to May. In the food and fuel retail trade, confidence indicators have already reached positive values ​​as the economic situation improves, while in the non-food retail trade and in the sale of cars, motorcycles, parts and accessories, confidence indicators remain negative.

Image: Central Statistical Bureau (CSB)

In June, the main factor limiting economic activity in retail trade, as in the period before the Covid-19 outbreak, is still competition in its trade sector, which was noted by 38.1% of respondents. However, the impact of Covid-19 on business in the retail sector (36.6%) and insufficient demand (35.5%) lag only slightly behind. In June, 18.6% of retailers did not experience any factors restricting economic activity.

In the services sector, in June 2020, according to seasonally adjusted data, confidence was -30.4. Compared to May, this indicator has increased by 7.0 percentage points. Confidence indicators in June are still negative in all service sectors, but the lowest as in the previous month were in accommodation, food, travel agency and tour operator. Relatively optimistic assessments have been provided by company managers and leading specialists in the fields of computer programming, veterinary, legal and accounting, as well as financial services.

If in May 2020 50.8% of companies in the service sector indicated the emergency situation as a significant obstacle to successful economic activity, then in June, when the general economic situation in the service sector slightly improved, only 39.9% mentioned the impact of Covid-19 as an obstacle.

To the same extent as a year ago, companies feel insufficient demand (32.2%), but labor shortage, which has significantly lost its importance in recent months, is mentioned by only 3.6% of respondents as a limiting factor. In June, 30.5% of respondents in the service sector did not feel any factors restricting economic activity.

According to seasonally adjusted data, the confidence indicator in construction in June this year was – 24.3, which increased by 8.8 percentage points compared to the previous month, which was influenced by a more positive assessment of entrepreneurs about the level of construction orders and an optimistic assessment of expected employment in the next three months. The confidence indicator increased in all construction sectors – building construction, civil engineering and specialized construction.

Compared to May, the number of respondents who have indicated “insufficient demand” (31% of surveyed construction companies) and the impact of Covid-19 (13% of respondents) out of all factors influencing the volume of construction. On the other hand, the number of companies that have noted the lack of labor force as a limiting factor has increased by 8% (15% of respondents). 32% of the surveyed construction companies’ economic activity in June was not affected by any restrictive factors.

In manufacturing, the confidence indicator was -12.1 in June (an increase of 2.3 percentage points compared to May), which was influenced by more optimistic business leaders’ forecasts for their company’s activity for the next three months (expected production activity, total economic activity) and slightly more positive current order levels. assessment. Although confidence indicators remained negative in June, they have increased month-on-month in most manufacturing sectors. The largest increase in the confidence indicator was in the manufacture of beverages (by 16.6 percentage points), the manufacture of computer, electronic and optical products (by 15 percentage points), the manufacture of furniture and clothing. On the other hand, the confidence indicator decreased in the repair and installation of machinery and equipment, in the manufacture of basic pharmaceutical products and pharmaceutical preparations, in the manufacture of motor vehicles, trailers and semi-trailers and in the manufacture of textiles. Compared to May, entrepreneurs’ sentiment improved both in terms of the expected sales price of goods and the expected development of employment in the coming months.

Compared to the previous month, the companies’ assessment of the total volume of orders in the last three months (by 2 percentage points) has slightly decreased, but the assessment of the expected volume of export orders in the next three months (by 10.3 percentage points) has significantly increased, including the assessment of export orders to European Union (EU) and Commonwealth of Independent States (CIS) Member States. Compared to May, the assessment of the competitiveness of manufacturing companies in both the domestic and foreign markets has also slightly improved in the last three months. Compared to the previous period, the number of companies that indicated “insufficient demand” (43% of all respondents) and the impact of Covid-19 (15% of the surveyed manufacturing companies) out of all the factors influencing production in the company has decreased. 33% of the surveyed manufacturing enterprises in June were not affected by any factors limiting production.

In June of this year, the economic sentiment indicator was 83.73, which is 4.8 points more than in May.

Image: Central Statistical Bureau (CSB)

The economic sentiment indicator describes the overall socio-economic situation in a country over a given period (month) and is calculated for all EU countries according to a common methodology by the European Commission’s Directorate-General for Economic and Financial Affairs, based on 15 different seasonally adjusted industries, construction, retail and services. components included in the consumer confidence indicator.

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