Industrial production fell by 5.3 percent in May

Industrial production in Croatia fell by 5.3 percent year-on-year in May, marking its largest decline this year and exceeding expectations.

The Croatian Bureau of Statistics announced today that, according to seasonally adjusted data, industrial production in May decreased by 2.2 percent compared to the previous month, while it plummeted by 5.3 percent compared to May of last year.

This is the largest production decline since December of last year, when it fell by 5.6 percent, and significantly sharper than anticipated.

Five macroeconomists who participated in a Hina survey estimated that industrial production in May fell by an average of 1.1 percent compared to the same month last year. Three of them expected a decline between 1.6 and 2.5 percent, one expected stagnation, and one anticipated a growth of 1.0 percent.

Since the beginning of the year, industrial production has fluctuated significantly. In January, it increased by 3.4 percent, in February it sharply fell by 4.1 percent, and then rose by the same amount in March. In April, however, it weakened by 0.5 percent.

– Although a larger decline than last month was expected, the drop of 5.3 percent is significantly greater than estimated. A strong increase in energy production, influenced by favorable weather conditions, only mitigated the overall decline in production – says Zdeslav Šantić, chief economist of Splitska Banka.

Looking at the GIG, only energy production increased year-on-year in May, by 11.3 percent.

On the other hand, the production of capital goods fell the most, by 23.2 percent year-on-year, followed by the production of non-durable goods for general consumption, which fell by 8.4 percent.

The production of durable goods for general consumption slid by 7.8 percent, while intermediate goods decreased by 1.4 percent.

– The sharp decline in the manufacturing industry of 10 percent is concerning. The largest decline was recorded in the production of capital goods, primarily due to the restructuring of the shipbuilding industry – says Šantić.

The decline in industrial production is a result of weak domestic consumption, weak foreign demand due to the recession in the Eurozone, as well as the restructuring of the domestic industry.

– The continued decline in the production of food products is worrying, indicating that a process of more intensive restructuring is beginning, while, on the other hand, competition from other countries is increasing as protectionist measures in the domestic market are being lost. The decline in production in this segment is also a result of the relocation of production capacities to countries in the region to maintain a privileged status in CEFTA, as well as due to lower production costs – concludes Zdeslav Šantić, who expects a decline in production throughout this year due to the restructuring process.

In the first five months of this year, industrial production fell by 0.6 percent.