Slight Growth of Croatian Industrial Production for the Second Consecutive Month

In February, industrial production in Croatia increased for the second consecutive month, indicating a stabilization of production, although the growth was slightly below the expectations of macroeconomists.

The Croatian Bureau of Statistics announced today that industrial production, according to seasonally adjusted data, weakened in February compared to January by 0.1 percent, while it increased by 0.2 percent compared to February of last year. This is slightly lower growth than anticipated, as six macroeconomists who participated in a Hina survey had, on average, expected industrial production growth of 0.5 percent year-on-year. Nevertheless, this marks the second consecutive month of year-on-year production growth, considering that it rose by 1.5 percent in January, indicating a stabilization of activity in the industrial sector. Previously, production had weakened for 15 consecutive months.

"We could say that industrial production has passed the bottom. The growth of production in the first two months of this year was most influenced by an extremely low base, given that last year during this period, in addition to the uncertainty at the peak of the global financial crisis, the gas crisis further impacted the industry," says Hrvoje Stojić, head of the Economic Research Department at Hypo Alpe Adria Bank. Last year, in the first two months, due to gas reductions, industrial production plummeted at double-digit rates. Therefore, the strong growth of production of durable goods for broad consumption in February by 32 percent, and non-durable goods for broad consumption by 9.2 percent can be attributed precisely to the low base from last year. Energy production also increased year-on-year by 1.8 percent, while the production of intermediate goods fell by 11.2 percent, and capital goods by 4.6 percent.

"Along with the base effect, the growth of production in the past two months was most influenced by the replenishment of stocks for both domestic and foreign markets, as stocks were quite depleted last year. A sporadic recovery in foreign demand has also had a slightly positive impact on the domestic industry," says Stojić. Although the industrial sector has passed the bottom, Stojić does not rule out the possibility of a decline in production in the coming months as a recovery in domestic demand will not come soon. This is indicated by a further decline in retail trade at the beginning of this year, so domestic consumption cannot be expected to stimulate the industry. "For now, there are still many ‘noises’ in the indicators of industrial production, due to the base effect and stock replenishment, so we need to wait a few more months for the situation in the industry to clarify. However, due to the weakness of domestic consumption, I do not expect industrial production growth to exceed 1 percent for the entire year," concludes Hrvoje Stojić, head of the Economic Research Department at Hypo Alpe Adria Bank. (H)