Improved Business Climate for July in Both Manufacturing and Retail Industries
In July 2025, Latvia's Economic Sentiment Indicator (ESI) rose slightly to 99.5, demonstrating a modest improvement in overall economic confidence compared to the previous month [1][3]. However, the Employment Expectations Indicator (EEI) dipped to 98.2 points, falling below its long-term average and indicating a more cautious outlook regarding employment [3].
The manufacturing sector maintained an optimistic environment, with the confidence indicator reaching the highest value in the last three years at -3.3 in July, an increase of 0.4 percentage points compared to the previous month [1]. On the other hand, the services sector slightly worsened, as the seasonally adjusted confidence indicator in July was zero, and it decreased by 0.9 percentage points compared to June [1].
Meanwhile, the retail trade sector showed improvement, with the confidence indicator reaching 1.4 in July, an increase of 0.8 percentage points compared to the previous month [1]. The construction sector, while not specifying the confidence indicator for July, has generally preserved an atypically high value in the sector [1]. This indicates that the construction sector maintains an uncharacteristically optimistic environment [1].
Out of 23 manufacturing sectors surveyed in July, the business environment improved in 8 sectors, worsened in 14, and remained unchanged in one sector compared to the previous month [1]. The Total Economic Uncertainty Index in July was 11.8, a decrease of 0.9 percentage points compared to the previous month [1].
Consumer Confidence in Latvia was negative at -7.7 points in July, reflecting cautious consumer attitudes that may also impact employment and economic activity [1]. The Consumer Price Index (CPI) in Latvia reached a record high of 151.8 points in July 2025, pointing to ongoing inflationary pressures [5].
In summary, Latvia's economy in July 2025 showed a mixed picture: while some sectors, such as manufacturing and retail trade, demonstrated stable or improving business sentiment, other sectors, such as services and construction, showed signs of weakness. Additionally, employment expectations were weaker, with the EEI falling below its long-term average, suggesting a more cautious or negative outlook regarding employment in the near term. The ongoing inflationary pressures and cautious consumer sentiment may have contributed to this mixed economic picture.
[1] Statistics Latvia [3] Central Statistical Bureau of Latvia [5] European Union's Statistical Office (Eurostat)
- The financial sector, considering the ongoing inflationary pressures as indicated by the Consumer Price Index (CPI), may need to carefully assess their strategies to mitigate these pressures in the manufacturing, retail, and overall business sectors.
- The mixed economic picture in Latvia, with a decline in employment expectations and weaker sentiments in some industries like services, could potentially influence the finance and investment decisions in the retail and other sectors.
