Gross domestic product continues with its period of growth

According to the flash estimate published by the Central Statistical Bureau (CSB), gross domestic product (GDP) grew 1.3% in the fourth quarter of 2012 (quarter-on-quarter, seasonal factors excluded). The annual growth rate was even higher, at 5.1%. Thus in 2012 overall, GDP grew by about 5.5%.

The available branch data pointed to further GDP growth even earlier. The previously expressed concern that the year-end might be less successful in manufacturing did not materialize. Manufacturing production output grew 1.8% in the fourth quarter. Retail turnover, taking into account automobile sales, grew 1.8% at the end of the year. The improvement in confidence indicators likewise pointed to continued economic growth.

It is not yet clear in which branches growth indicators have been lower and have "dragged" the GDP figure down. Actually there is only one candidate: in the November data, there was a substantial drop in the cargo volumes transported by rail on account of repair work on rails on the Russian side: that should have a negative impact on value added created by the branch. The operational indicators in other branches meanwhile point to positive developments in the fourth quarter of 2012. The grain procurement volumes point to a good quarter in agriculture. The output volumes of non-metal minerals as well as rubber and plastic products indicate that construction might not post any substantial drop or even register a small growth. The situation remains unclear for now only in the branches of private and public services. A full picture by branch will only become available in a month when CSB will publish the full GDP data. The confidence indicators on January and the first quarter of 2013 published by the European Commission indicate that the Latvian economy will continue on its path of growth in the early 2013 as well. The branch confidence indicators are at a high level and the expected capacity utilization continue to increase gradually. In recent months, various indicators continue to improve in the euro area as well, giving rise to hopes that the worst of the euro area debt crisis has been left behind. It must be kept in mind, however, that problems in Europe have not been fully solved: the real economic data on the year-end 2012 still point to a recession: the production output of euro area manufacturing continues to drop as do retail trade volumes. Thus there is no place for exceeding optimism in this area: enterprises should rely more on themselves searching for new markets and creating new products.

It must be kept in mind that the GDP flash estimate is based on the operational statistics of particular branches (industry, construction, trade as well as taxes on products). The full GDP data will be published by the CSB on 11 March 2013. That will give rise to more clarity regarding components determining GDP growth. It may be one of the rare occasions when the revision of the flash estimate is downward pointing, because the CSB, in calculating GDP, will take into account the negative data of the transportation branch.