Manufacturing output on a rise in May

In May, the dynamics of the volume of new orders in most of the sectors in manufacturing as well as the results of business surveys released by the European Commission point to a further growth in manufacturing. This was also confirmed by the CSB data about the output in the sector - in May, the seasonally adjusted industrial output in manufacturing grew by 1.3% month-on-month, while the annual growth reached 13.3% (working day adjusted).

Despite a small fall in April, the fast growth in March resulted in a high base; therefore the increase in May should be looked upon as a further improvement. It suggests that manufacturing is likely to give a positive contribution towards economic growth also in the second quarter.

Several sectors in manufacturing reported an increase in output over the month, with textiles and wearing apparel, chemical and pharmaceutical products, electrical equipment, furniture and other manufacturing as well as repair and installation of equipment demonstrating the most pronounced rise.

Year-on-year, several sectors registered a significant growth in output, including textiles, wood and products of wood, chemical products, rubber and plastics products, metals and metal products, electrical equipment, electronic and optical products as well as engineering.

Speaking of further developments, though minor positive changes could be observed in private consumption in the first quarter and in April, in the nearby future external demand and export competitiveness will continue to be the main drivers of growth in the manufacturing sector. The dynamics of export orders is not stable and in June it was somewhat weaker than in May; in June the businesses expected notable improvements after one month. The recently expanded eligibility to export credit guarantees for companies doing business also with Latvia's major trade partners is a positive factor.

Yet, risks still remain due to an uneven economic recovery in the euro area countries and the dampening effect on consumption following budget cuts in a number of EU economies.