After a significant rise in March, a small drop has followed in the processing industry

Following the very rapid rise in processing industry production output in March, when growth reached 12.5%, a small drop was observed in this branch in April. According to the seasonally adjusted data, compared to March the production output decreased by 0.7%. This change is partly explained by a higher base for calculation but entrepreneur survey data also indicated that a small drop might be possible in April, since the order rate was lower in March.

Compared to the production output volumes in March, a downslide was observed in several sectors, with the output contracting faster in the production of textile products, furniture, and construction materials. The production of pharmacauticals, ready-made metal products, computers, and electronics, on the other hand, grew substantially.

Owing to the successful development of export, the production volumes in April increased 8.0% year-on-year. That was mostly due to the rapid rise in wood pulp product and chemical product manufacturing.

The future development of the sector will continue to be influenced by opposing factors. The results of entrepreneur surveys published by the European Commission indicate that the competitiveness of the Latvian processing industry has been improving for several consecutive quarters both in the domestic market and the EU countries and outside the EU. The rapid rise in new orders in April also allows us to hope for a successful development.

Yet risks that may slow down the growth of the processing industry also remain intact. The domestic demand, albeit improving, is still weak. Unaltered are also the risks related to the worsening of the fiscal and financial situation in several countries of the euro zone, which may limit a further growth in foreign demand in our main export markets.a