Home » Business » In September, business sentiment in Latvia deteriorated in the retail and services sectors

In September, business sentiment in Latvia deteriorated in the retail and services sectors

Business confidence indicators decreased in retail and services in September 2021, but sentiment indicators in construction and industry have not changed significantly, according to Central Statistical Bureau (CSB) business survey data.

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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.

For the second month in a row, retailers’ sentiment is deteriorating

According to seasonally adjusted data, the retail confidence indicator was 3.7 in September. Compared to August, this indicator has decreased by 2.5 percentage points. The confidence indicator is positive in both food and non-food retail. Business sentiment is also positive in car sales. Retail fuel sales, on the other hand, continued to fall sharply in September, falling by a further 19.3 percentage points from August and turning negative. It should be noted that with the onset of autumn, retail confidence indicators are also characterized by a seasonal decline.

The share of surveyed retailers, who noted that they do not feel any restrictive factors for their economic activity, has slightly decreased. In September, there were 22%. The importance of labor shortage as a limiting factor has significantly increased – it was noted by 20% of respondents. Insufficient demand and competition in their retail sector were cited as limiting factors by 23% and 42% of retailers, respectively, and have increased compared to August. In September, 28% of surveyed retailers noted that their economic activity was significantly limited by the influence of Covid-19, a figure that has been declining since its peak in January (55%).

Sentiment in the services sector is deteriorating, but remains positive

In the services sector, in September 2021, according to seasonally adjusted data, confidence was 0.6. Compared to August, this indicator has decreased by 6.3 percentage points, but it has been positive since May. Sentiment indicators vary significantly across service sectors, and their trends also vary depending on the specifics of the sector, seasonal effects and the extent to which the Covid-19 pandemic affects the sector. Compared to August, there was a significant increase in confidence in financial services, except insurance (by 15.1), veterinary services (by 5.9) and motion picture, video, television and sound production (by 5.5 percentage points). In September, the mood was negative in ten of the 30 sub-sectors of the service sector surveyed, but in some of them, such as building maintenance and landscape architectural services, it can be assessed as a normal, seasonally low indicator. The most pessimistic mood in September was in the land (-14.1) and water transport (-21.6) sectors.

In September, 31% of respondents in the service sector did not experience any factors restricting economic activity. On the other hand, since March, the proportion of respondents who indicate that the consequences of Covid-19 is a significant limiting factor for their successful economic activity has been decreasing every month. In September, it was 23%. The significance of other potential constraints on entrepreneurship has not changed in recent months: insufficient demand (28%), financial difficulties (13%) and labor shortages (16%).

In construction, the confidence indicator is still negative

According to seasonally adjusted data, the confidence indicator in construction was -10.2 in September this year (a decrease of 0.3 percentage points compared to the previous month), which was influenced by a more pessimistic mood of entrepreneurs about the expected employment development in the next three months, as well as a more negative assessment of construction orders. . The confidence indicator decreased in civil engineering and specialized construction, but increased slightly in building construction.

For the third month in a row, the construction sector has been hit hardest by insufficient demand and labor shortages (noted by 28% and 25% of surveyed entrepreneurs, respectively). The negative impact of Covid-19 was reported by 5% of companies in September. Lack of materials or equipment and financial difficulties were mentioned by 14% of construction companies as limiting factors, while the negative impact of weather conditions was indicated by 12% of respondents. Compared to September last year, there has been a significant increase in the number of companies reporting a shortage of materials or equipment (an increase of 4.7 times), as well as a shortage of labor and bad weather (an increase of 11 and 4 percentage points respectively). At the same time, the number of respondents who indicated insufficient demand as a limiting factor decreased (a decrease of 5 percentage points). In September of this year, 25% of the surveyed construction companies did not feel any restrictive factors for their economic activity.

In manufacturing, the confidence indicator remains positive

In manufacturing, the confidence indicator was 0.3 in September (an increase of 0.2 percentage points compared to August), which was influenced by a slightly more positive assessment of entrepreneurs by the current level of orders and a decrease in the level of stocks of finished goods. The largest month-on-month increase in the confidence indicator was in manufacturing industries such as the manufacture of basic pharmaceutical products and pharmaceutical preparations, manufacture of other transport equipment, manufacture of non-metallic mineral products, manufacture of electrical equipment and repair and installation of machinery and equipment. The decrease was in the manufacture of rubber and plastic products, in the manufacture of motor vehicles, trailers and semi-trailers, in other manufacture, in the manufacture of machinery and equipment nec and in the manufacture of beverages. Compared to the previous month, the attitude of entrepreneurs about the development of employment is slightly more positive, but less optimistic – about the expected sales price of goods in the next three months.

Compared to August of this year, the share of entrepreneurs who have indicated a lack of materials or equipment has increased (indicated by 19% of respondents), but the number of companies that have indicated insufficient demand and financial difficulties from all factors limiting production has slightly decreased (26% and 8% of respondents, respectively). company). The share of manufacturing enterprises whose production was affected by labor shortages and Covid-19 in September was at the level of the previous month (noted by 25% and 8% of respondents, respectively). In September of this year, the economic activity of 31% of the surveyed manufacturing enterprises was not affected by any restrictive factors (compared to the previous month, a decrease of 4 percentage points).

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