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Economies continue to adjust
Mon, Sep 1 2008, 12:13 GMT
by Danske Research Team
Estonia
Next week the Estonian Statistical Office will publish
figures for industrial output. We do not expect a rebound in industrial
production, but still our forecast of a decline of 1.0% y/y s.a. in July is an
improvement after a fall of 4.7% y/y s.a. in June. Inflation pressure should
ease as well to 10.8% y/y in August from 11.1% y/y in July. The marked economic slowdown has started to
prevent underline[ underlying?] inflation from increasing too sharply. However, the risk to export-oriented
industrial sectors continues to increase as the reduction in wage growth is
slower then expected, and certainly slower than is currently required taking
into account the rate of deceleration in growth in the domestic economy. In
general we expect the gap between productivity and wage growth to be closed in
2009.
Lithuania
Lithuanian industrial production slowed to 3.8% y/y in
July, while excluding oil refinery activity it shrank by 0.6% y/y after
producer prices increased by 26% y/y (excluding oil refinery by 17.5% y/y). This
trend shows a marginal improvement in non-oil-related industrial activities, as
June data reported a 2.9% y/y decline. We expect the overall producer price
index to slow to 25.4% in August. However, persistently high labour cost
growth, still substantially greater than productivity growth, dampened
industrial sector competitiveness. During Q2 08 Lithuanian wages increased,
unsustainably, by 22.5% y/y.
Latvia
We expect industrial output in Latvia to fall further by 10.6% y/y s.a. in July
from the decline of 6.4% y/y in June. Given the Latvian economy’s fairly negative outlook over the next
couple of years, we do not expect a rebound in industrial production in the
next month. The labour market situation remains tight with the unemployment
rate falling further to 6.3% in the second quarter from 6.5% in the first. Note
that labour market figures comprise a lagging indicator. Consequently, as the
domestic economy cools, so should the pressure also.
Published on Mon, Sep 1 2008, 12:24 GMT
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