The output of industrial products in Latvia for the first nine months of this year, according to seasonally adjusted data in comparable prices, increased by 3.7% compared to the corresponding period of 2024.
How do Latvian economists explain this?
Agnese Puke, economist:
– It is encouraging that the growth of the manufacturing industry is supported by a wide range of sectors and is not the result of any one particular area. This gives reason to believe that the growth in production volume in manufacturing may continue.
Uncertainty in economic policy has finally begun to decrease, allowing businesses to better plan exports. Furthermore, since the end of last year, both in Latvia and in partner trading countries, positive trends in construction activity have been observed, which contributes to the demand for construction materials, woodworking products, and metal structures.
Although the first half of this year was less inspiring in terms of investments in manufacturing compared to the previous year, the cumulative investments of recent years have been significant, and this is gradually beginning to reflect in production volumes and exports. These two factors create an extremely favorable combination: the ability to produce is growing alongside the desire to produce. This means that both demand and supply are strengthening, which provides a doubly solid foundation for further growth.
Peters Straujinsh, economist:
– At the beginning of the year, the then modest growth of the manufacturing industry was largely supported by unusually strong performance in the food industry, while engineering sectors were in decline. In September, however, negative indicators compared to the previous year were observed only in four small sub-sectors — the production of clothing, textiles, beverages, and in the 'other manufacturing' group, which in Latvia mainly includes candles, medical instruments, and toys.
Currently, there is good dynamics based on sustainable factors. The contribution to growth in September was primarily provided by the woodworking industry. The key driver of the sector is the production of more deeply processed products. In the food industry, for the third consecutive month, annual growth is around 10%, and this year has been favorable for the fish, meat, and dairy processing sub-sectors.
For the second consecutive month, growth in metalworking exceeds 10%, reflecting improvements in machinery and construction. Since the beginning of the year, the dynamics in the electronics sector have changed significantly — from a decline of 13% in January to growth of 10% in September.
Data on industrial turnover show that export sales in September increased by 12.9%, while the domestic market grew by 7.5%. In the long term, the growing role of export markets is logical: development means deeper specialization in the production of specific goods, which reduces the share of sales in the domestic market. However, the domestic market is also important, and this year, especially after mid-year, its prospects are improving.
Agnese Buceniece, economist:
– According to the survey data on manufacturing sentiment published by the European Commission, production volumes in the remaining months of the year look good, with a trend towards growth. However, it is also evident that producers' assessments regarding the overall volume of orders and export orders are becoming more cautious. But these indicators are still around the long-term average level.
Less positive news includes the fact that there have been no improvements for several months, and a slight decline appeared in the October surveys. One of the sectors where the decrease in orders has been particularly noticeable is the production of non-metallic mineral products. This sector, at least partially dependent on demand in construction, has historically shown significant fluctuations in order volumes.
Given the global backdrop and forecasts of a significant slowdown in global trade growth, it can be expected that next year the growth of the manufacturing industry will become more moderate.
