Decline in Latvia's Industrial Output Observed in October
In a surprising turn of events, industrial production output in October 2024 witnessed a decrease of 0.2% compared to September 2024. However, the more significant drop of 2.0% compared to October 2023 was primarily attributed to a range of broad economic headwinds and adverse weather conditions.
The decline, which included a significant drop in electricity and gas supply, was driven by ongoing trade tensions, weak property markets, government factory overcapacity reduction measures, and unfavourable weather conditions. Specifically, capacity curbs due to high temperatures and severe weather affected production levels, particularly in energy sectors like electricity and gas supply.
Trade policy uncertainty and tariff concerns also dampened manufacturing sentiment and production in many sectors. Structural government efforts to reduce overcapacity in certain industries further restrained output growth. In some regions, declines in utilities output were often linked to volatile weather conditions affecting electricity and gas production.
Despite some growth in manufacturing segments such as automotive and high-tech equipment, the overall industrial production, including utilities, declined due to these combined pressures.
The manufacturing turnover at current prices in October 2024, compared to October 2023, was lower on non-domestic markets by 1.2%. Contrarily, it increased by 1.6% on the domestic market compared to September 2024. However, the overall manufacturing turnover at current prices in October 2024, compared to September 2024, remained relatively stable, with a minor decrease of 1.5% on the domestic market and an increase of 3.3% on the non-domestic market.
The output in manufacturing at constant prices in October 2024 was 1.2% lower compared to October 2023, and 0.1% lower compared to September 2024. The most substantial drop was observed in the electricity and gas supply sector, with a 19.0% decrease compared to October 2023 and a 1.2% decrease compared to September 2024.
These findings suggest that while the industrial sector is facing numerous challenges, there are pockets of resilience, particularly on the domestic market. The confluence of macroeconomic challenges and environmental factors largely explains the 2.0% drop in industrial output and the pronounced decrease in electricity and gas supply in October 2024.
The decline in industrial production, particularly in the electricity and gas supply sector, could negatively impact the finance industry, as reductions in energy supply might increase costs for various sectors and might have ripple effects on the economy. The ongoing adverse conditions in the industry, such as trade tensions, government factory overcapacity reduction measures, and weather conditions, could lead to a slowdown in financial growth.
