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.

Latvian Retail Sales May 2008

Well the statistical anomalies produced by the ealy timing of easter now seem to be working themselves out, and the data are getting back towards normality, which means that Latvian retail sales (working day corrected) were down by 5.1% year on year in May, and by 2.4% (seasonally adjusted) over April. Nothing more to say on this really, other than to be continued....




While I am here, the EU Economic Sentiment Index for June has now been published, and here is the principal chart for the Baltic countries.



Latvia seems to have now overtaken Estonia on the downward charge, with Lithuania still some way behind, evn if it is catching up fast.

Latvia Producer Prices May 2008

Latvian factory-gate prices, considered to be an early indicator of inflation in the economy, rose at an annual 11.9 percent in May, the second highest rate of growth in five months. Producer-price growth compared with 12.1 percent in April, according to data from the statistics office this morning. Prices rose 1.3 percent from April.




Compared with May 2007, producer-price growth was boosted by food prices and increases in the cost of electricity and natural gas, which added 9.1 percentage points to the overall figure, the statistics office said.

The worrying thing here is perhaps that the rate of increase inexport prices, after declining for several months was up again in May, rising to an annual 3.9% from 2.3% in April. Domestic prices were up a horrifying 17.4% in May.

Latvia Current Account Deficit Q1 2008

Latvia's current-account deficit, which was the widest in the European Union last year, narrowed in the first quarter over Q1 2007 as economic and import growth slowed. The Q1 2008 deficit was 19.4 percent of gross domestic product, compared with a 26.6 percent deficit in the first quarter of last year, according to the Latvian the central bank this morning. The deficit in total was 666.2 million lati ($1.48 billion).

Latvia's economy is has been slowing dramatically as lenders tighten credit and the inflation rate, at a 12-year high of 17.9 percent in May, reduces consumers' buying power. Economic growth slowed to an annual 3.3 percent in the first quarter, the lowest level since 1999, and working day adjusted retail sales fell 1.1 percent.

Latvia Inflation May 2008

Latvian inflation accelerated again in May, with the annual inflation rate rising to 17.9 percent, the highest in the 27-nation EU. Bulgaria currently has the second-highest rate, at 14.6 percent.

The already strong rate of consumer-price growth has been further boosted by rising energy costs and food prices. Despite the fact that activity is slowing - Latvia's economy expanded a revised 3.3 percent in the first quarter, compared with 8 percent in the previous three-month period - inflation continues unabated. Food prices, the biggest item in the consumer basket, rose an annual 21.6 percent, but other areas like education (20.5%) and hotels and catering (23.2%) are going up at a rapid clip, and there is no short term sign of all this abating.

Latvia and Estonia Retail Sales April 2008

Retail sales in both Latvia and Estonia perked up a bit in April, although as we the industrial output data I am still not sure how to interpret this, since moving Easter around so much has influenced the data to some extent.


Latvia

In comparison with March, total retail turnover in April 2008 was up by 2.3%, according to data from the Central Statistical Bureau. This growth was recorded in almost all commodity groups.

Retail trade of food products was up 0.2%, and non-food products were up 2.9%.

Compared to April 2007, retail turnover was up in April by 1.2%2, and the main driver here was the increase in sales of non-food products (by 5.5%). Sales of food products were down by 5.8% year on year.

Compared to March, in April 2008 retail trade turnover of enterprises the main activity of which is the sale of motor vehicles, motorcycles and parts thereof increased by 10.2%1, and compared to April 2007 the increase was 4.2%.

In the months January – April 2008 the turnover of motor vehicles, motorcycles and parts thereof was down by 5.3% year on year: The volume of cars sold decreased by 10.8%, but sale of motor vehicle parts, as well the sale of motorcycles and motorcycle parts grew by 10.1%.




Estonia


According to Statistics Estonia, in April 2008 compared to April 2007 retail sales were unchanged (ie 0% growth) at constant prices.

In April, the retail sales of goods of retail trade enterprises were 4.6 billion kroons. In grocery stores the retail sales of goods decreased one percent compared with the April of the previous year. Retail sales in stores selling manufactured goods increased by 2% compared with the same period of the previous year. Compared to April of the previous year, the retail sales of pharmaceutical goods and cosmetics increased 10%, the retail sales of stores selling textiles, clothing and footwear and also of stores selling household goods and appliances, hardware and building materials increased 1%. Retail sales of non-specialized stores selling industrial goods and retail sales of other specialized stores stayed at the same level compared to April of the previous year.

Compared with March, retail sales increased by 1%.

In April the revenues from sales of retail trade enterprises were 5.5 billion kroons, of which retail sales of goods accounted for about 85%. Compared to April 2007, the revenues from sales increased 9% at current prices.