Construction volumes stayed on the level of the previous year in 3Q

According to Statistics Estonia, in the 3rd quarter of 2016 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries increased 0.5%.

In the 3rd quarter of 2016, the production value of construction enterprises amounted to 612 million euros, of which the production value of building construction was 398 million euros and the production value of civil engineering was 214 million euros. Compared to the 3rd quarter of 2015, the volume of building construction increased 8% and the volume of civil engineering decreased 11%.

The domestic construction market is still influenced the most by a fall in civil engineering volumes. There was also decrease in repair and reconstruction work in building construction. At the same time, new building construction continued to grow.

The construction volume of Estonian construction enterprises in foreign countries increased 1.4% compared to the 3rd quarter of 2015, influenced mainly by the construction of buildings. Construction volumes in foreign countries accounted for 13% of the total volume of construction in the 3rd quarter of 2016.

According to the Register of Construction Works, in the 3rd quarter of 2016, dwelling completions numbered 1,061, i.e. 84 dwellings more than in the same period a year ago. More than a half of the completed dwellings were situated in blocks of flats. The majority of completed dwellings were situated in Tallinn and in the rural municipalities in the vicinity of Tallinn.

There is still a demand for new high-quality dwellings in a good location. In the 3rd quarter of 2016, building permits were granted for the construction of 1,485 dwellings, which is slightly fewer than in the 3rd quarter a year ago. The most popular type of building was a block of flats.

The number of completed non-residential buildings was 216 with a useful floor area of 194,000 square metres – this consisted primarily of new commercial, industrial and storage premises. Compared to the 3rd quarter of 2015, both the useful floor area and the volume of completed non-residential buildings increased.Diagram: Construction volume index and its trend, 1st quarter 2003 – 3rd quarter 2016

The statistics are based on the questionnaire “Economic activity, quarter”, the submission date of which was 20 October 2016. Statistics Estonia published the quarterly summary in 27 working days. For the statistical activity “Financial statistics of enterprises”, the main representative of public interest is the Ministry of Economic Affairs and Communications, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia

The turnover of retail trade enterprises was 537 mEUR in October

According to Statistics Estonia, in October 2016 compared to October 2015, the turnover of retail trade enterprises increased 2% at constant prices. The deceleration in turnover growth was influenced the most by enterprises engaging in the retail sales of automotive fuel.

In October 2016, the turnover of retail trade enterprises was 537.4 million euros. The deceleration in turnover growth was influenced the most by enterprises engaging in the retail sales of automotive fuel, where the sales decreased 12% compared to October 2015. The turnover fall in these enterprises was partly influenced by the high reference base of October 2015 and acceleration in the price increase of automotive fuel.

The turnover of grocery stores has been rather stable in recent months. In October, the turnover of these stores remained on the same level as in October 2015.

The turnover of stores selling manufactured goods increased 10% compared to October 2015. Turnover increased in all economic activities. The increase was the biggest in stores selling pharmaceutical goods and cosmetics, with sales having increased 15% compared to October of the previous year. An above-average increase in turnover occurred also in other specialised stores, such as stores selling computers and their accessories, books, sports equipment, games and toys etc. (14% growth). In October, the turnover of non-specialised stores selling predominantly industrial goods (e.g. department stores), having shown a small decline in September, went on an uptrend again and grew 3% compared to the same month of the previous year. Turnover increased also in stores selling textiles, clothing and footwear (6% growth), in stores selling second-hand goods and in non-store retail sale (stalls, markets, direct sale) (7% growth), in stores selling household goods and appliances, hardware and building materials (9% growth) and in stores selling via mail order or the Internet (10% growth).

Compared to the previous month, in October, the turnover of retail trade enterprises increased 3%. According to the seasonally and working-day adjusted data, the growth was 1%. In the ten months of 2016 (January–October), turnover in retail trade enterprises increased 4% compared to the corresponding period of the previous year.

In 2016, to publish monthly statistics on retail trade, Statistics Estonia started to use only the VAT declaration data of the Estonian Tax and Customs Board and stopped data collection with the questionnaire “Turnover”. This reduced the response burden of entrepreneurs and Statistics Estonia’s expenditure on data collection, and increased the use of administrative data. Due to the change in the data source, the monthly news release “Retail trade” will focus on the turnover of retail trade enterprises, instead of the retail sales of such enterprises. Statistics Estonia will continue publishing the retail sales indicator of retail trade enterprises on a quarterly and yearly basis. Statistics Estonia published the monthly summary in four working days. For the statistical activity “Economic indicators of trade enterprises”, the main representative of public interest is the Ministry of Economic Affairs and Communications, commissioned by whom Statistics Estonia performs this statistical activity.

Source: Statistics Estonia

Estonia’s wage growth 7 pct in 3Q

• Wage growth remained rapid in the 3rd quarter at 7%, over the year.
• We expect average gross wage to slow to around 5% in 2017.

In the 3rd quarter of 2016, the average monthly gross wage was 1,119 euros in Estonia, up by 7.1% over the year. Net average wage grew also rapidly, by 6.8% in real terms. The growth of gross wages will probably remain around 7% in the remaining months of the year as labour market remains tight. There were about 9,500 job vacancies in Estonia in the 2nd quarter of 2016. The number of job vacancies exceeded 9,000 last time in 2008.

The rapid growth in the average wage is supported by a lack of suitable labour, a 10% increase in the minimum wage, a political agreement to raise the wages of teachers and healthcare workers, and strong domestic consumption that lifts the sales of enterprises selling their products and services in the domestic market. The average gross wage increased in all sectors, except mining, which has been hurt by low energy prices.

The growth of wages in real terms will slow dramatically in 2017, as nominal growth of wages will be somewhat slower and prices will rise. This, in turn, will limit households’ consumption. The substantially slower growth of wage-earners’ purchasing power will be smoothed by a higher employment rate and an increase in social transfers to pensioners and families.

SOurce: Swedbank

Estonian economy grew 1.1% in the 3rd quarter

According to the flash estimates of Statistics Estonia, the gross domestic product (GDP) of Estonia increased 1.1% in the 3rd quarter of 2016 compared to the 3rd quarter of the previous year.

In the 3rd quarter of 2016, the seasonally and working-day adjusted GDP increased by 0.2% compared to the 2nd quarter and by 1.3% compared to the 3rd quarter of 2015.

Real GDP growth was positively influenced by net taxes on products. Although at current prices the receipts of alcohol excise duty decreased, compared to the 3rd quarter of the previous year there were increased receipts of both value added tax and the remaining excise duties. At the same time, payments of subsidies grew.

After having declined in the previous four quarters, the industrial sector’s value added grew more than 4%. The fastest growth took place in the production of energy. In the 3rd quarter, both the export and import of goods grew in real terms compared to the same quarter of the previous year. An increase in the export of electronic products and electrical equipment was the main contributor to the growth of export.Diagram: GDP, real growth of the export of goods and value added in the industrial sector

The industrial sector includes the following economic activities: mining and quarrying; manufacturing; electricity, gas and water supply; and construction.

The flash estimate of economic growth is calculated only by the production approach using VAT return information from the Estonian Tax and Customs Board and data from various statistical actions of Statistics Estonia which have been obtained by the time of preparing the estimate. Therefore, the flash estimate may differ from the revised estimates of the GDP, which are based on the respective quarterly data and calculated by the expenditure, production and income approaches.

Source: Statistics Estonia

In September, exports grew faster than imports

According to Statistics Estonia, in September 2016, the exports of goods increased by 13% and imports by 2% compared to September of the previous year. In the third quarter as a whole exports grew 7%.

In September, exports from Estonia amounted to 1.1 billion euros and imports to Estonia to 1.2 billion euros at current prices. The trade deficit was 62 million euros (in September 2015, it was 161 million euros).

The top destination country of Estonia’s exports in September was Sweden (15% of Estonia’s total exports), followed by Finland (15%) and Latvia (10%). The biggest increase occurred in exports to the Netherlands, Mexico and Germany (up by 33 million, 26 million and 16 million euros, respectively). Compared to September 2015, more mineral products were exported to the Netherlands and more electrical equipment to Mexico and Germany. Exports to the main destination country Sweden decreased by 13 million euros.

The biggest share in Estonia’s exports in September was held by electrical equipment, followed by mineral products, agricultural products and food preparations and miscellaneous manufactured articles. The increase in exports was greatly influenced by the exports of mineral products (incl. motor spirits, shale oil), electrical equipment (incl. communication equipment) and mechanical appliances (incl. industrial equipment). There was a decrease in the exports of agricultural products and food preparations.

The share of goods of Estonian origin in total exports was 71% in September. Compared to September 2015, the exports of goods of Estonian origin increased by a tenth and re-exports, i.e. the exportation of goods imported from a foreign country, by a fifth. The exports of goods of Estonian origin were influenced the most by a rise in the exports of mineral products, electrical equipment and mechanical appliances. Among goods of Estonian origin, the biggest decrease occurred in the exports of agricultural products and food preparations.

The main countries of consignment in September were Finland (13% of Estonia’s total imports), Germany (12%), Lithuania (10%) and Latvia (10%). The biggest rise occurred in imports from the Netherlands, Russia and the Czech Republic. Compared to September 2015, there was a growth in the imports of electrical equipment from the Netherlands, of mineral products from Russia and of electrical equipment from the Czech Republic. The greatest decrease occurred in imports from Finland.

In September, the main commodities imported to Estonia were electrical equipment, agricultural products and food preparations, and transport equipment. The growth in imports was influenced the most by the imports of transport equipment and raw materials and products of the chemical industry. The biggest fall occurred in the imports of mechanical appliances.

In the 3rd quarter of 2016, exports increased 7% and imports 1%, the previous time that exports grew this much quarter-over-quarter was in the 3rd quarter of 2012. Export growth compared to the same period of 2015 was influenced the most by the increased exports of electrical equipment and mineral products. In the 3rd quarter, among destination countries, the biggest increase occurred in exports to Mexico, Romania and the Netherlands.

Read more from Statistics Estonia

Economic growth in Estonia weak in the 3Q

Economic growth in Estonia continued to be weak in the 3Q. According to the flash estimate, Estonian economy grew 1.1% yoy and 0.2% qoq (seasonally and calendar adjusted). The GDP has increased 1.1% yoy during the first three quarters. We shall probably revise slightly down our GDP forecast made in August. 

Despite this meagre growth, industrial sector value added reached to the growth in the 3Q, after a year of decline, value added growth in manufacturing accelerated and energy production showed a robust volume growth, as well. According to the flash estimates, value added in transport and ITC sectors and in wholesale and retail trade increased. Although, private consumption is expected to slow gradually, retail trade growth is still strong. GDP growth was inhibited by the poor harvest in agricultural sector and the decrease in the number of employees in public sector that reduced value added in public administration.

Although the foreign trade statistics and export turnover in manufacturing showed accelerated growth of export of goods, the same indicator, after certain adjustments, in GDP slowed down compared to the second quarter. The growth of import of goods decelerated, as well.

All economic sentiment indicators have gradually improved in Estonia. The growth of corporations’ credit portfolio has accelerated this year, which refers to the improved investment activity among enterprises. Households credit portfolio and investments in dwellings have increased with the moderate pace, as well. Investment growth is restrained by government sector, who has used only a small amount of money from the EU structural funds allocated for Estonia for the period in 2014-2020.

Many of these indicators refer to the gradual improvement of economic situation in Estonia. In addition, job vacancies have increased and nominal growth of wages is robust.

Although we expect the deceleration of economic and import growth in Sweden, UK and Germany, the average import demand of the major export partners for Estonia is expected to improve in 2017. This is expected to offer more export possibilities for Estonian enterprises. In addition, we expect that government will increase the payments from the EU funds in next year and will contribute positively to the investment growth. Producer and export prices are increasing and this is expected to improve enterprises turnover, including export turnover. At the same time, negative risks in the global economy and trade are substantial. Estonia’s new government, currently under formation, will likely bring about changes in economic policy, but before the coalition agreement has been put in place, it’s too early to assess these impact on the Estonian economy.

Source: Swedbank

Estonian unemployment rate 7.5 pct in 3Q

• Employment decreased by 1.2%, over the year, in the third quarter.
• The unemployment rate jumped to 7.5% in the third quarter.
• Employment is expected to marginally decline and the unemployment rate to grow in 2017.

Changes in the third quarter’s labour market data were larger than expected. Employment decreased by 1.2%, over the year. Employment declined in the construction, energy, and manufacturing industries. The construction sector has been hit by lower volumes of infrastructure construction. The energy sector has had to reduce output due to low energy prices. In the second quarter, the decline in the employment in the secondary sector was offset by a strong growth in the employment in services. In the third quarter, the number of employees in the services’ sector was only marginally higher than one year before.

Employment is expected to marginally decline in 2017. Working-age population is shrinking and surging labour costs motivate organisations to increase the efficiency of their production processes. Employment in the construction sector should increase, though, as the volume of public construction projects is expected to grow substantially next year. The outlook of the energy sector should also improve as the price of oil is expected to gradually move higher.

The number of inactive decreased by 3.5%, over the year, in the third quarter. Major drivers of this decline, in addition to the tight labour market, were an increase in the retirement age and rearrangement of the social benefits system regarding people with disabilities; these people are now entitled to certain benefits only if they work or actively look for work. The unemployment rate increased to 7.5% in the third quarter (5.2% in the third quarter of 2015). 53,000 people were actively looking for a job; around half of them had been seeking employment for less than 6 months. At the end of October, there were 5,000 people with reduced working ability looking for a job through the Estonian Unemployment Insurance Fund. As many of them might find it hard to find a suitable job, the unemployment rate is expected to grow next year.

Source: Swedbank