Manufacturing is on the rise, and so are prices

Manufacturing is on the rise, and so are prices
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On the back of last year, when several plants were idle due to different supply chain disruptions caused by the pandemic, the second quarter of 2021 in manufacturing looks like a bash with its output growth of 14.2% in annual terms.

Compared to the first quarter of 2021, the growth was more moderate, i.e. 2.2%. Looking at the dynamics since the onset of Covid-19, the capacity utilisation in the manufacturing sector has recovered and overall output volumes even exceed the pre-pandemic levels. The surge in turnover, driven by a price rise, has been even more impressive (see Chart 1).

Chart 1. Manufacturing output (volume index) and turnover (average in 2019=100%)


Manufacturing output (volume index) and turnover (average in 2019=100%)
Source: Central Statistical Bureau of Latvia and Latvijas Banka's estimates


Despite the persisting issues with shortages of various components, higher raw material prices, availability of freight containers and growing transportation costs, several industry subsectors demonstrate remarkable output growth rates, e.g. manufacture of parts for motor vehicles, textiles, printing, manufacture of building materials, chemical products, fabricated metal products, and rubber products. Wood businesses and manufacturers of furniture are also riding on the crest of the wave, with considerably higher prices.

However, for part of the businesses engaged in further processing wood products, the price rise of raw materials causes concern. Nevertheless, the current high demand serves as a remedy: the customer is also ready to pay a higher price.

The sector of repair and installation of machinery and equipment is not doing so well, with shortage of different spare parts being a potential considerable negative factor.

Chart 1 shows that it was only the first wave of the pandemic that left an obvious impact on the overall manufacturing output. Hence, further development of this sector is also likely to be more stable, despite potential new waves of the pandemic. However, the average temperature in a hospital is only part of the story. Each subsector and business have their own challenges, and the various effects of the pandemic are also there: some are lucky to increase their output, while others produce less.

APA: Rutkovska, A. (2021, 21. sep.). Manufacturing is on the rise, and so are prices. Taken from https://www.macroeconomics.lv/node/5284
MLA: Rutkovska, Agnese. "Manufacturing is on the rise, and so are prices" www.macroeconomics.lv. Tīmeklis. 21.09.2021. <https://www.macroeconomics.lv/node/5284>.
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