Latvia Retail Sales Continue To Fall In June

According to Latvijas Statistika compared to June 2007, in June retail trade turnover was down by 8.3% (working day adjusted), of which in enterprises selling mainly food fell by 6.1%, while non-food enterprises fell by 9.7%. Month on month total retail trade turnover in June was down by 2.2%




Obviously the contraction in Latvian domestic demand continues, and it is hard to see where this will now end.

The latest EU economic sentiment indicator was published this morning, and again it is down we go for the Baltics in the case of all three countries, and yet one more time:

Latvian Exports Drop Sharply In May 2008

According to the latest data from Latvijas Statistika, exports dropped in May (to 369.7 million lats) from 403.4 million lats. At the same time imports were down from 688.5 million lats in April to 599 million lats with the result that the trade deficit was down from 285.1 million lats in April to 229.3 million lats. Year on year exports were up 6.2% over May 2007 and imports were down 11.5% year on year.



Compared to April, in May 2008 the most rapid decrease were in the exports of paper and paper board, and paper articles – by 60.7%, of furniture, including mattress and articles of bedding and similar furnishing – by 29.0%, of electrical machinery and equipment – by 22.8%, of products of prepared fish, crustaceans, molluscs and preserves – by 20.8%, of sawn wood – by 19.4%. Exports of agglomerated and non-agglomerated peat increased by 25.2%, of milk, cream and milk products, excluding butter, cheese and curd – by 20.8%, of iron and non-alloy steel – by 12.9%, of unprocessed wood – by 8.2%.


If we look at the evolution of industrial output up to May:



And retail sales:



It is hard to imagine that Q2 2008 GDP will contain much in the way of good news.

Latvian Inflation Drops Back Slightly In June

Latvia's annual inflation rate declined for the first time in 13 months in June, but at a colosal 17.7 percent it still remained the highest in the 27-member European Union. According to Latvijas Statistika the decline from May's record 17.9 percent annual rate was due largely to a slightly lower than expected rise in food prices.



Compared to May the average consumer price level in rose by 0.7%. In June price growth in fuel was 4.7%, fresh meat 5.9%, vegetables and potatoes 3.0%, while footwear was down 5.5%.

Prices also decreased for cars, household equipment, TV, audio, visual, photographic and computer equipment, equipment for sport and open-air recreation, as well as tools and equipment for house and garden, seeds, plants and flowers, reimbursed medicines, glassware and tableware. In other words we already have significant durable goods price deflation.

What is really most striking about this situation is how, despite the fact that all the main economic data lead to the conclusion that Latvia is now deep in recession, unemployment has still to go up. According to the latest data from the Latvian Labour Board, the unemployment rate at 4.8% was unchanged in May from April, and the number of unemployed dropped from 52,897 in April to 52213 in May.

Sharp Slowdown In Latvian Industrial Output in May 2008

Well the May industrial output reading is really quite a shocker, since when compared to April 2008, industrial output in May 2008 at constant prices (i.e. allowing for the influence of the price change) was down by 3.1%, according to the (seasonally adjusted data) accoring to the Latvian Central Statistical Bureau. Of this there was a volume decrease of 3.3% in manufacturing, 3,4 % in electricity, gas and water supply, and in mining and quarrying the production volume was up by 7.1%.



Compared to May 2007, industrial output in May (according to working day adjusted data) was down by 8.5%. Of which there was a volume decrease of 8% in manufacturing, a 9,6 % decrease in electricity, gas and water supply, and a 3.1% increase in mining and quarrying.




According to the statistics bureau the decrease in industrial production is related to a drop in demand and a decrease in orders in the following economic activities: food, textiles and wearing apparel, manufacture of wood, paper products, printing, chemicals and chemical products, rubber and plastic products, construction materials and furniture.

I don't know where all the people are right now who were predicting a "soft landing" (in hiding to conceal their shame I hope, or at least doing public "mea culpas" and correcting the flaws in their methodologies), but it really does look as if the Q2 2008 GDP result could be something of a shocker, if the Industrial Output readings and the retail sales data are anything to go by.



The only saving grace at this point would appear to be external trade, and this could be more of a positive element due to the statistical impact of the slowdown in import growth (caused by the drop in domestic demand) rather and real robustness in exports. Still the May 2008 extrenal trade data is due out next week, and at that point we should get a much better idea.

Exports werte up a healthy 24.7% year on year in April.



Although it is important to remember that Latvia still runs a substantial trade deficit dèspite some recent improvement.