Industrial Production in Croatia Declines for the 14th Month

The weakness of domestic consumption and the slow recovery of foreign demand do not allow for a stronger recovery of the industry in Croatia, and it is estimated that industrial production fell in November, marking the 14th consecutive month of decline, but at a lower rate than the previous month.

Today, the Croatian Bureau of Statistics will publish a report on industrial production for November. In October, production fell by 8.6 percent compared to the same month last year, which represents a moderation of the decline compared to the previous month, and analysts expect further slowing of the decline. In a survey conducted by Hina, six analysts estimate that industrial production in November fell in the range of 6 to 8 percent. On average, they expect a production decline of 7.2 percent. As reasons for the moderation of the production decline, analysts cite the gradual recovery of foreign demand, partial replenishment of stocks, a lower base from last year, considering that in the same month last year production fell by 3.5 percent, and the fact that energy production is relatively stable.

The stability of energy production is evidenced by the data showing that in October, the energy sector recorded a production increase of 4.8 percent compared to the same month last year, as the heating season began. The strengthening of the energy sector has mitigated the decline in industrial production in October, as all other categories recorded lower production on an annual basis, which is a result of reduced consumption and investment activity.

In addition to reduced domestic demand, the decline in industrial production in November could be greater due to the fact that there was one less working day in November this year compared to the same month last year. “Until the end of this year and in the first half of next year, the unfavorable impact on industrial production will come from the weakening of domestic consumption, which is a consequence of the reduction in household disposable income due to increased fiscal burdens and unemployment, but also due to the expected reduction in public spending,” notes one of the analysts in the Hina survey.

On the other hand, favorable developments in foreign markets, namely the recovery of eurozone economies, could have a positive impact, which will also positively reflect on the demand for products from the countries of ‘New Europe’. In the first ten months of this year, industrial production in Croatia decreased by 9.6 percent compared to the same period last year. The largest decline in 2009 was recorded in January, when it amounted to 14.1 percent year-on-year, and the smallest in March, when industrial production fell by 6.6 percent.  (H)