In September, the volumes of Latvian industry decreased by 2.7%. Production volumes in mining and quarrying decreased by 20.9%, in processing industry by 4.6%. Electricity and gas supply experienced an increase of 18.3%. The volume of production decreased according to the share in the largest sector – wood industry (-6.2%). On the other hand, there was an increase in two of the three largest manufacturing industries by proportion – food products (6%) and finished metal products (3%).
Forward-looking indicators point to continued weakness in manufacturing. The October manufacturing PMI showed that global manufacturing activity continued to decline at the start of the 4th quarter. The global manufacturing PMI output index fell from 49.7 in September to 48.9 in October, marking the third straight month of contraction in activity. However, the global indicator includes significant differences between economies.
India’s PMI index was exceptionally strong. In Europe, where the economy is facing complex challenges, the PMI index was well below the 50 mark in many places – and points to a further slowdown in activity. In China, the average fell unexpectedly and also points to economic difficulties. China’s economic slowdown makes things difficult for Europe, as Europe’s industrial sector is more dependent on the Chinese market than the US.
Finally, the small increase in the US manufacturing PMI contradicted the decline in the ISM index, which also indicates a rather complicated situation among companies in the sector.
The difficult external environment through exports will keep the industry in a recession phase in the next six months, slowing down the development plans of many industries. The most challenging conditions will prevail in the woodworking industry, where recovery will begin with the activation of construction in European markets. But it can slide all next year.
In the nine months of this year, the growth of the food industry is pleasantly surprising, where last year there was an opposite negative. For a large part of industries, an important impulse will come from the local market, where great expectations are connected with the inflow of European funds and it is to be hoped that the institutions will not disappoint.
The outlook will remain grounded in the winter months and will most likely improve in the second quarter of next year, when the further path to interest rate cuts will become clearer.
2023-11-05 09:46:00
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