Foreign market continues to generate revenue
The positive effects of the renewed foreign demand can already observed in the foreign trade data, whereas the possibilities for sales in the domestic market, for instance, for processing industry products still lag behind previous years..The February industrial production data in branch breakdown already indicated that production increases are observed particularly in the biggest processing industry branches that produce mainly for export. The driving force of the foreign market is also attested by the latest information on the turnover in particular branches of the processing industry as well as the data on foreign trade in February.
After the foreign trade activity was minimal in January, which is characteristic of the season, the Latvian export volume grew substantially (by17.1%) already in February, and was higher year-on-year (by 18.2%). Month-on-month, exports increased in practically all main branches, especially for food industry products (41.9% month-on-month and 11.7% year-on-year), mechanisms and mechanical equipment (respectively 39.4% and 24.4%), as well as optical equipment and apparata (respectively 24.7% and 25.7%); substantial rises were observed for exports of wood pulp and its products, printing industry exports as well as mineral products exports.
Conditions for price and cost competitiveness remained beneficial: because of low economic activity the domestic component (e.g., wages) is at a low level and there is no observed tendency for it to grow and the domestic price level has dropped and, with the weak domestic demand, is not motivating for a fast growth of imports, therefore import growth was slower than export growth (+10.3% in a month and decrease over a year -2.6%) and the foreign trade deficit remains low; moreover, the trade balance compared to the three previous months improved.
The improvement in consumer and producer situation indicators in the first quarter warrants a positive outlook on the developments in manufacturing and foreign trade in the next few months.