In March, the mood of entrepreneurs improved in the manufacturing industry, construction and the service sector – Economy, finance

Riga, 28.03.2024. In March 2024, compared to February, the mood of entrepreneurs improved in the manufacturing industry, construction and the service sector, but worsened in retail trade, according to the data of the conjuncture surveys1 conducted by the Central Statistics Office (CSB).

Business confidence indicators describe the general situation in the industry and are obtained, conducting conjuncture surveys of industry, 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.

In retail trade, the mood of entrepreneurs worsens

In March, the seasonally adjusted retail confidence index was 1.8, down 1.3 percentage points from February. In the retail trade of both food and non-food goods, according to seasonally unadjusted data, business sentiment in March, compared to February, worsened by 1.6 and 0.2 percentage points, respectively, but was positive (1.4 and 1.7). Characteristic of the season, the confidence index in fuel retail increased rapidly, rising from -11.7 in February to 5.7 in March.

Since September 2023, businessmen’s mood in automobile trade has been negative, reaching its lowest point in January of this year (- 20.3). In March, compared to February, the confidence index decreased by 0.9 percentage points and is still very low (-17.1). On the other hand, in the trade of car parts and accessories, as well as their repair, the mood of entrepreneurs in March improved by 12.8 percentage points compared to the previous month, reaching a positive value of 12.2.

The sentiment in the services sector is improving slightly

In the services sector, in March, according to seasonally adjusted data, the confidence index was 2.7, and business sentiment has improved by 2.6 percentage points compared to February. As usual, sentiment indicators differ significantly in different service sectors, and the trends of their changes are also different depending on the specifics of the sector and the influence of the season. The most optimistic in March according to seasonally unadjusted data were advertising and market research service providers (22.1), entrepreneurs in the computer programming industry (13.8), as well as those performing office administrative activities and other auxiliary activities of companies (13.5). On the other hand, the lowest indicators of sentiment in March, as in February, were in land and air transport services (respectively – 15.3 and – 15.8), however, in both of these sectors, the mood of entrepreneurs has improved compared to the previous month.

In general, in March, out of the 30 surveyed service sub-sectors, the mood of 17 entrepreneurs was positive, 13 – negative. Confidence indicators have increased in 15 sectors compared to February, decreased in 13, and remained unchanged in two.

In construction, the mood of entrepreneurs is steadily negative

In construction, according to seasonally adjusted data, the confidence index in March was – 10.2, which, compared to the previous month, has increased by 3.3 percentage points.

In March, compared to February, based on seasonally unadjusted data, entrepreneurs’ assessment of the expected changes in employment in the next three months increased by 13.9 percentage points, while the assessment of the current total level of orders decreased by 0.3 percentage points. In March, compared to February, the confidence index increased in all construction sub-sectors: in engineering construction – by 11.2, in specialized construction works – by 6.5, and in building construction – by 2.0 percentage points.

Construction activity in March was most limited by insufficient demand and bad weather conditions (indicated by 41% and 38% of respondents, respectively). Labor shortage and financial difficulties were indicated by 18% and 14% of construction contractors as a limiting factor, respectively. The lack of materials or equipment was noted by 5%, while 16% of the interviewed entrepreneurs did not feel any factors limiting construction activity in March.

In the manufacturing industry, since the beginning of the year, the mood of entrepreneurs has been improving every month

In the manufacturing industry, according to seasonally adjusted data, the confidence index in March was – 5.0. Compared to February, it increased by 1.0 percentage points.

In March, compared to February, according to seasonally unadjusted data, business sentiment increased in proportion in the largest manufacturing industries: food products production (by 4.0 percentage points), chemical substances and chemical products production (by 8.4 percentage points) and non-metallic mineral products production ( by 8.5 percentage points). On the other hand, the sentiment worsened in the production of wood, wood and cork products (by 4.6 percentage points), in the production of metal products, excluding machinery and equipment (by 0.9 percentage points) and in the production of computers, electronic and optical equipment (by 7.6 percentage points).

In the manufacturing industry, the confidence index is calculated for 23 sectors. In March, compared to February, there was an increase in the confidence index in 15 sectors, a decrease in 6, but in two sectors the mood of entrepreneurs has not changed.

March 2024 economic sentiment indicator³ It was in Latvia 98.1 (same as the previous one). The economic sentiment indicator describes the overall socio-economic situation in the country in a given period (month) based on 15 different seasonally adjusted industrial, construction, retail and service sectors, as well as the consumer confidence index⁴ contained components. The value of the indicator above 100 indicates that the numerical characteristics of the economic situation exceed the long-term (2000-2023) average value. On the other hand, the value of the indicator below 100 shows that the characteristics of the economic situation are lower than the long-term average value.

The indicator of employment change expectations was 100.5 in March (previous month 100.9).This is a composite indicator consisting of seasonally adjusted indicators of expected changes in employment in the manufacturing, construction, retail trade and services sectors, taking into account the share of employment in each of these sectors. An indicator value above 100 indicates that the balance of seasonally adjusted expected employment changes exceeds the long-term (2000-2023) average value. On the other hand, the value of the indicator below 100 shows that the balance of expected employment changes is lower than the long-term average value.

The economic uncertainty index was 17.4 in March (19.3 in the previous month). This indicator characterizes the predictability of the socio-economic situation in the country, and it is made up of indicators of the predictability of the economic activity of companies in industry, construction, retail trade, the service sector, as well as consumers’ assessment of the predictability of the household’s financial situation. If the indicator is above zero, the uncertainty of the socio-economic situation is increased, its development is difficult to predict, if below zero, the situation is easy to predict, it is more certain. In March, compared to February, uncertainty decreased in the construction and service sectors (by 1.9 and 2.6 percentage points, respectively). On the other hand, in retail trade, the indicator of economic uncertainty increased by 4.3 percentage points, and in manufacturing industry by 0.3 percentage points. A great influence on the reduction of the overall uncertainty indicator was the consumer assessment, which decreased by 6.9 percentage points compared to February and is negative (- 3.7)

More information on economic indicators is available in the “Business forecasts (economic indicators)” section of the official statistics portal.

¹Business cycle surveys in industry, construction, retail trade and the service sector are conducted monthly by CSB in accordance with the methodology of the EU’s Joint Harmonized Cycle and Consumer Survey Program with co-financing from the European Commission.

²The balance is calculated as the difference between the positive and negative answers of the interviewed entrepreneurs, expressed as a percentage.

³ The Economic Sentiment Indicator, Employment Expectations Indicator and Economic Uncertainty Indicator are calculated by the European Commission’s General Directorate for Economic and Financial Affairs (ECFIN) using the results of business cycle surveys conducted by the Member States, according to a common methodology.

⁴The consumer situation survey is conducted every month in accordance with the methodology of the EU’s Joint Harmonized Situation and Consumer Survey Program with the co-financing of the European Commission by the company “Latvijas Fakti”.

Central Statistical Office