Season slows foreign trade in November, trend toward recovery unchanged
As a result of seasonal factors, a reduction in export values, by close to 9%, was observed in November, its annual growth at 0% (as late as October it was -12.7%). Exports of some agricultural and food products, pharmaceuticals, and wood pulp products increased over a month and positive annual growth was observed in very many export product groups. A drop in nominal exports was caused by decreased grain exports as the autumn season ended as well as by a drop in metal exports. There is a little time lag between the data on industrial production and exports and the fast growth of processing industry, especially its exporting branches, will probably appear in the foreign trade date in the next few months.
The drop in imports compared to October was more moderate (-1.4%) and, according to the seasonally adjusted data, growth in imports was observed. This was slightly dampened by an increase in prices of mineral products, however the imports of land vehicles and pharmaceuticals grew rapidly.
It must be noted that the latest situation indicators show decreased entrepreneur pessimism: in November and December, compared to the previous months, the monthly expectations of the volumes of new orders in industry have improved a slightly. The quarterly expectations of export volumes, the degree of capacity use in processing industry as well as competitiveness domestically, in the EU market, and outside of it are also gradually improving. The entrepreneur assessment of competitiveness in foreign markets improved in the fourth quarter of 2009 to the second quarter level of 2008.
Baltic Dry index value in November was relatively high against 2009, therefore small growth could be expected in the services trade data (balance of payments).
The development of world economy has stabilized, market activity is beginning to rise, and it could be said that the lowest point is behind us. However, the potential stability of resumed Latvian export increases in the next few periods could be determined by whether we can offer exports that match demand. The rearrangements made in the economy as well as effectiveness measures are already helping to secure competitiveness; the price competitiveness indicators continue to improve: in November both the nominal effective lats exchange rate shrank and the consumer price deflated real effective exchange rate did so as well.