Production increased in manufacturing

According to Statistics Estonia, production increased in manufacturing, but decreased in energy and mining.

In April, the total production in manufacturing was 3% higher than in the corresponding month of 2018. In April, over a half of the branches of industry exceeded the volume of the same month of the previous year. The growth in production was mostly due to an increase in the manufacture of food products, computers and electronic products and furniture. Among the branches of industry with larger shares, production fell in the manufacture of wood and fabricated metal products.

In April, 68% of the total production of manufacturing was sold to the external market. According to unadjusted data, compared to April 2018, the sales of manufacturing production for exports increased by 8% and sales to the domestic market by 9%.

In April 2019, compared to March, the seasonally adjusted total industrial production decreased by 1% and the production of manufacturing fell by 2%.

Compared to April 2018, the production of electricity decreased by 37% and the production of heat remained at the same level.

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Estonia’s 1st quarter GDP at 6.7 bEUR

According to Statistics Estonia, the year-on-year growth of the gross domestic product (GDP) of Estonia was 4.5% in the first quarter of 2019.

Seasonally and working day adjusted GDP grew 0.5% compared to the previous quarter and 4.6% compared to the 1st quarter of 2018.

Economic growth was driven by manufacturing. The last time that manufacturing had such an impact was four years ago, in the 2nd quarter of 2015. Nevertheless, economic growth in the 1st quarter was broad-based, as five other economic activities made notable positive contributions. These were information and communication; professional, scientific and technical activities; wholesale and retail trade; agriculture, forestry and fishing, and transportation and storage. The value added in construction, which had driven economic growth for the last two and a half years, did not increase in the 1st quarter, remaining at the previous year’s level. The only significant negative impact on economic growth came from electricity, gas, steam and air conditioning supply.

Domestic demand grew 4.6% in the first quarter. The slower growth compared to the previous quarters was mainly on account of household final consumption (2.8%). The fast growth of gross fixed capital formation, which had started at the end of the previous year, continued in the 1st quarter, at 20.4%. This was primarily the result of investments by nonfinancial enterprises into transportation equipment, and machinery and other equipment. Household investments into dwellings grew notably as well.

The exports of goods and services grew 4.6% in the first quarter. The exports of goods grew 6.9%, the fastest pace in the last two years. Biggest contributions to growth came from the exports of coke, petroleum products and computer, electrical and optical equipment. The exports of services, which have usually grown faster than the exports of goods, experienced a slight decline (-0.4%). This was the result of the decline of exports of construction and freight rail transport services. The imports of goods and services grew 3.8%. The import of goods grew 4.8%, largely due to the imports of metal products and electrical equipment. The imports of services grew 0.5%. The share of net exports in GDP was 3% in the first quarter of 2019.

In the 1st quarter, both the number of employed persons and worked hours increased. As a result, the productivity per person employed grew 2.7% and the productivity per hours worked grew 3.3%. The growth of unit labour cost was the same as the GDP growth rate, at 4.6%.

Source: Statistics Estonia

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Tallinn Old Town Days 30.05.-02.06.2019

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Great workshops – https://vanalinnapaevad.ee/en/workshops/

Music- https://vanalinnapaevad.ee/en/music/

Historical events, guided tours (check the languages available) – https://vanalinnapaevad.ee/en/history/

Shortage of labour and hike in the minimum wage

In the first quarter of 2019, the average full-time gross wage amounted to EUR 1341, up by 8.0%, in a year. The average gross wage increased in almost all sectors. Wage growth was more rapid in construction, where volumes have grown markedly in recent years. The average wage was the highest in finance, energy, and ICT in the first quarter. A rapid growth in the average wage is supported by a shortage of labour and a hike in the minimum wage. Minimum wage will rise to EUR 540 in 2019, up by 8.0%, over the year.

Consumption grew in line with wages
The average net wage rose by around 6% in the first quarter, over the year, around the same rate as the growth of retail sales. The average real net wage grew by around 4%. That is much less than last year when net incomes where substantially lifted by an income tax reform. Due to a strong wage growth and higher social transfers, families’ assessment of their financial situation is the highest on record and well above the level of the previous economic boom.

The stock of deposits is growing fast (+9.5%, over the year, in April 2019), but many households still have no or very limited financial reserves. According to the Bank of Estonia, 40% of households have less than EUR 1000, and a fifth of families less than EUR 100, in savings. 51% of families manage to save, according to the Estonian Institute of Economic Research.

Wage growth is expected to stay rapid
The number of job vacancies and the number of persons leaving on their own initiative remained high. Thus, wage pressure will persist. The average gross wage should grow by around 7% this year. Rapid wage growth hurts exporters more than companies who sell their goods or services in the domestic market as Estonian companies are usually price takers in the global market, unable to pass higher costs to their customers. Estonian companies’ assessment of their competitiveness has deteriorated since the second half of last year, in all markets, in and outside the EU.

Source: Swedbank

Strong beginning of 2019 exceeded expectations

Economic growth remained very strong at the beginning of 2019. In the first quarter of 2019, GDP growth in Estonia accelerated to 4.5% yoy in real terms and to 8.5% yoy in nominal terms. Strong first quarter growth exceeded our expectations. Seasonally and working day adjusted GDP grew by 0.5% compared to the previous quarter. In addition, the fourth quarter GDP growth was revised up by 0.1 pp to 4.3%. However, these are preliminary numbers, which will be revised several times.

Construction sector growth running out of momentum

Economic growth in the first quarter was broad-based. After a moderate growth of the last three years, manufacturing shot up again by 11%. Manufacturing was the main contributor to GDP growth in the first quarter and accounted for roughly one third. Previously, the main driver of economic growth had been construction sector, which did not contribute to economic growth in the first quarter. However, the slowdown of construction sector growth was expected. Strong contribution to GDP growth came also from agriculture; professional and technical activities; wholesale and retail trade; transportation and ICT sectors. Negative impact to the growth came mainly from energy sector.

Foreign demand still supporting Estonian economy

The growth of foreign demand has slid from the peak, but still offered good export opportunities. In the first quarter, export of goods has accelerated to 7%, while export of services has decelerated for the first time in three years. Total export increased by 5% and exceeded total import growth.

The growth of domestic demand decelerated to 4% in the first quarter. The growth of private consumption slid from the last year’s strong growth and decelerated to 2.8%. This was surprisingly weak growth considering that in the first quarter retail sales were strong, rapid wage growth continued and refunds of the excess income tax amounts were made. Investments showed strong growth for the second quarter in a row, increasing by 17% in the first quarter of 2019. The main contribution was the growth of investments of non-financial corporations due to base effect.

Economic growth in Estonia is expected to slow this year

According to our latest Swedbank Economic Outlook published in April, economic growth in Estonia is expected to decelerate to 3% this year. The main reason of the slowdown is expected weakening of the foreign demand. Economic growth has been above its long-term potential for already three years in a row and slower growth should be more sustainable for the economy. Although, due to the rapid growth of the beginning of the year we should revise up our April forecast, the next large revision this year by the Statistical Office will probably change the GDP time series.

Source: Swedbank

Sales increased by 7 pct in 1Q

According to Statistics Estonia, in the 1st quarter of 2019, enterprises sold goods and services for 14.8 billion euros, which was 7% more than in the same period the year before.

Compared to the 1st quarter of 2018, turnover increased in most economic activities, except in mining and real estate, where turnover decreased. The biggest increase occurred in the turnover of education and professional, scientific and technical activities. Manufacturing and trade enterprises contributed the most to the turnover of the business sector. The turnover of both activities increased by 6%.

Compared to the same quarter of the previous year, the total expenditure of enterprises increased by 8%, including a 10% increase in labour costs. The number of persons employed as well as the number of hours worked increased by 3%. The labour productivity of the business sector on the basis of turnover amounted to an average of 31,800 euros in a quarter per person employed, i.e. 4% more than in the 1st quarter of 2018.

In the 1st quarter of 2019, enterprises invested 756 million euros, which is a third more than in the same period the year before. The investments were made mostly in machinery and equipment, and in buildings. Manufacturing, real estate and transportation and storage enterprises accounted for about a half of the total investments of all enterprises.

Compared to the 1st quarter of 2018, all investments increased. The biggest increase was registered in investments in land and in machinery and equipment.

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Construction growth slowed down

According to Statistics Estonia, in the 1st quarter of 2019, the total production of Estonian construction enterprises in Estonia and foreign countries increased by 2% compared to the 1st quarter of 2018. Construction volume increased due to the work done in foreign countries. On the Estonian construction market, construction volume decreased.

In the 1st quarter of 2019, the production value of construction enterprises amounted to 581 million euros, of which the production value of building construction was 459 million euros and the production value of civil engineering was 122 million euros. Compared to the 1st quarter of 2018, the volume of building construction increased by 2% and the volume of civil engineering by 3%.

The construction volume of Estonian construction enterprises in foreign countries nearly doubled compared to the 1st quarter of 2018, mainly on account of an increased volume of building construction. The growth was supported also by civil engineering. Construction volume in foreign countries accounted for 9% of the total volume of construction in the 1st quarter of 2019; the share in the same period a year ago was 5%.

On the domestic construction market, the construction volume decreased by 2%. Compared to the same period of the previous year, construction volume decreased in new building construction as well as in repair and reconstruction work. Civil engineering stayed at the level of the previous year.

According to the Register of Construction Works, the number of dwelling completions in the 1st quarter of 2019 was 1,770, which is 232 dwellings more than in the same period a year ago. The majority of completed dwellings were situated in Tallinn, followed by the rural municipalities in the vicinity of Tallinn, and in Tartu county.

In the 1st quarter of 2019, building permits were granted for the construction of 1,585 dwellings, which is 4% more than in the 1st quarter of 2018. The most popular type of building was a block of flats.

The number of completed non-residential buildings was 280, with a useful floor area of 139,600 m2 – these were primarily new agricultural and industrial premises. Compared to the 1st quarter of 2018, both the useful floor area as well as the volume of completed non‑residential buildings decreased.

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