Economic confidence in Estonia: consumers and most sectors improve, industry dips in June
Estonia's Statistics department reports that in June, consumer and business confidence improved in trade, construction and services, but declined in industry. The most notable shift was in price expectations, which turned from expecting increases to expecting decreases.
In June, confidence among industrial entrepreneurs in Estonia declined, while assessments in other sectors and among consumers improved slightly, according to the results of surveys conducted by Statistics Estonia, which measure economic confidence.
Compared to May, confidence assessments improved for consumers as well as for entrepreneurs in trade, construction and services. Entrepreneurs in the industrial sector were somewhat more pessimistic.
In June, the business confidence indicator was highest in trade (+20.5), in services and industry it stood at +3.1 and -3.8 respectively. The lowest was in construction (-12), where insufficient demand was cited as the main constraint by Statistics Estonia.
The consumer confidence indicator in June was -29, an improvement from May's reading of -31.
Compared to May, there was a notable shift in the assessment of price changes over the next three months. In May, the aggregate response indicated expectations of price increases (42.3 percentage points), while in June the average forecast pointed to price decreases (-8.1 percentage points). Statistics Estonia noted that the main factor was the addition of one large retail enterprise with a high number of employees to the sample in June.
Lenno Uusküla, chief economist at Luminor, observed that besides the improvement in consumer confidence, the June survey also showed a more optimistic assessment of households' economic situation over the next 12 months – the indicator moved from -25.4 to -23.6. Assessments of the country's economic situation for both the past and the coming year also improved, he added.
Confidence also grew in retail trade: both the retail sales index for the last three months (from 11.1 to 17.1) and the sales outlook for the next three months (from 40.7 to 49) increased. "The tax change that left people with more money means higher turnover for stores and gives confidence that the situation will be better in the coming months," Uusküla said.
"Positive changes are also visible in the services sector. Service sales are assessed more positively than before, although expectations of demand growth are slightly lower than in May. Nevertheless, the confidence indicator improved," he added.
Consumer assessments regarding price increases also improved, Uusküla noted. "June brought hope for the end of the crisis in the Middle East, and oil prices fell. The price growth indicator for the next year fell from 38.8 to 34.8. Expectations of price growth could improve further in the coming months, as the oil price fell to $72.6 per barrel, practically the same level as just before the outbreak of hostilities. Retail trade price expectations, in turn, fell from 42.3 to -8.1, indicating expectations of price declines over the next three months instead of price increases," he said.
Behind the worsening industrial production barometer are weaker assessments of production volumes, and the share of export orders and total orders is seen more negatively. Although production sales volumes are expected to grow, the index fell from 43.9 to 22.9, Uusküla reported.
In the construction sector, positive shifts in volumes are visible, and the confidence indicator improved from -17.1 to -12. "Construction volumes and orders improved. Although insufficient demand is still seen as the main factor limiting activity, there is also a growing assessment that a shortage of labor is constraining activity," Uusküla summarized.
Previously, the results of economic confidence surveys were published by the Estonian Institute of Economic Research, but since May of this year, this task has been taken over by Statistics Estonia.
