The fear of what the coming months hold is still present in trade and manufacturing, while satisfaction is rising again in other sectors. After the initial shock of sudden price increases, and thus business costs, entrepreneurs have entered the year’s final stretch more optimistically after their summer vacations.
Written by: Karolina Krpeljević,
analyst at Hendal
Hendal-Lider’s business optimism index recorded a rise of three percentage points in September, from 104.6 to 107.7 points, primarily due to a 4.5 percentage point increase in satisfaction with the business situation.
Manufacturing and trade are the only sectors where a decline in optimism has been recorded. The decline in the manufacturing sector is not overly large (4.7 percentage points), but it is important that satisfaction with the situation in September has weakened, as well as expectations for the next six months. Industrial production is still growing this year, but these percentages are relatively small for a real boom in that sector. According to DZS data, industrial production in July 2008 was 0.3 percent higher than that achieved in June 2008, and monthly industrial production in July this year compared to the same period last year shows a growth of 2.9 percent.
Turbulence in the Trade Sector
Turbulence in the trade sector fills media headlines, and the situation is not rosy as evidenced by DZS data, although at first glance they do not indicate a slowdown in that sector. Namely, the first row of results published for July this year compares them with June, according to which trade turnover was nominally 11.8 percent higher and real turnover was 12.8 percent higher. However, the true indicator is the comparison of turnover from July 2008 to July 2007, as nominal turnover increased by nine percent, but when the impact of prices is removed, turnover fell (-0.1 percent). A comparison of the first seven months of 2008 with the same period last year shows that retail trade turnover has only increased by 1.7 percent in real terms. The decline in optimism in that sector is the result of not only unsatisfactory revenues in previous months but also fear of what the coming months will bring.
Miljenko Marjanović, owner of Mima Furniture: The decline in turnover is already huge
Commenting on the situation in the trade sector in September, the owner of Mima Furniture, Miljenko Marjanović, emphasized that revenues in the sector fell by 20 percent in September and that he is not optimistic for the next few months. – I expect deterioration, results will go lower and lower, and the decline in turnover is already huge – says Marjanović, adding that consumers are tightening their belts, which has caused consumption to halt, and this will increasingly become apparent in the coming months.
Namely, optimism for the next six months has fallen by an incredible 16 percentage points and is now at a level of 87.8 points (it was only lower in August 2005 at 86 points). Given that this sector accounts for about a third of revenues in Croatia, and personal consumption is the largest part of GDP, it is understandable that a large number of economic experts are adjusting their GDP growth forecasts to the weak performances in that sector. Although many claim that the tourist season was not successful, especially the boarding house segment, satisfaction with the results and expectations for the next six months have led to a six percentage point increase in the index. DZS data for the first seven months indicate a 4.4 percent increase in overnight stays compared to the same period in 2007. Earnings from overnight stays are evidently sufficient income to please a large number of tourism operators, although many doubt that the figures will be satisfactory in terms of tourism revenue results. However, optimism is a result of interest in ski arrangements. Travel agencies reported that the rush for ski arrangements this year started very early and is 20 percent higher compared to 2007.
Recovery of the Transport and Services Sector
The transport and services sector is slowly recovering from the major shock at the beginning of the year when oil prices surged. In September, it recorded a threefold increase in expectations, as well as an increase in satisfaction with the business situation, so the optimism index rose by 5.3 percentage points. Although it is still below the level it was at from February 2006 until April 2008, the situation is slowly stabilizing, and companies could recover if there are no new shocks and pressures on profit.
