The construction price index continued to fall in 2Q

According to Statistics Estonia, the percentage change of the construction price index in the 2nd quarter of 2014 was –0.7% compared to the 1st quarter of 2014 and 0.8% compared to the 2nd quarter of 2013.

After three years of growth, the construction price index took a downturn in the 1st quarter of 2014 (compared to the previous quarter). This downtrend continued in the 2nd quarter.

In the 2nd quarter, compared to the same quarter of the previous year, the construction price index was primarily influenced by rising labour costs, which accounted for more than three quarters of the total increase of the index.

Compared to the previous quarter, costs of building materials decreased by 1.7%, while the costs of building machines increased by 3.0% and labour costs rose by 0.7%.

In the 2nd quarter of 2014, the percentage change of the repair and reconstruction work price index was –0.6% compared to the 1st quarter of 2014 and 0.7% compared to the 2nd quarter of 2013.

The calculation of the construction price index covers four groups of buildings: detached houses, blocks of flats, industrial buildings and office buildings. The repair and reconstruction work price index covers office buildings. The construction price index expresses the change in the expenditures on construction taking into consideration the price changes of three basic inputs: labour force, building materials and building machines.

Change in the construction price index, 2nd quarter 2014
1st quarter 2014 –
2nd quarter 2014, %
2nd quarter 2013 –
2nd quarter 2014, %
TOTAL -0.7 0.8
labour force 0.7 2.5
building machines 3.0 3.5
building materials -1.7 -0.4
Index of detached houses -0.5 0.2
Index of blocks of flats -1.0 0.6
Index of industrial buildings -0.2 1.2
Index of office buildings -0.9 0.8
Change in the repair and reconstruction work price index, 2nd quarter 2014
1st quarter 2014 –
2nd quarter 2014, %
2nd quarter 2013 –
2nd quarter 2014, %
TOTAL -0.6 0.7
labour force 0.6 2.5
building machines 2.3 5.2
building materials -1.5 -0.5

 

Source: Statistics Estonia

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The producer price index of industrial output decreased in June

According to Statistics Estonia, in June 2014, the producer price index of industrial output changed by –0.2% compared to May 2014 and by –3.1% compared to June 2013.

In June, compared to the previous month, the producer price index was more than average influenced by a decrease in prices in the manufacture of electronic equipment, in mining and in the manufacture of food products, but also by an increase in prices in the manufacture of fuel oils, chemicals and chemical products.

Compared to June 2013, the producer price index was more than average influenced by a decrease in prices in electricity, gas, steam and air conditioning supply and in the manufacture of electronic equipment, but also by an increase in prices in the manufacture of wood and wood products.

Change in the producer price index of industrial output by economic activity, June 2014
Economic activity according to EMTAK 2008 June 2014 –
May 2014, %
June 2014 –
June 2013, %
TOTAL -0.2 -3.1
Manufacturing -0.1 -0.4
Mining -4.7 -3.7
Electricity, gas, steam and air conditioning supply -0.2 -23.1
Water supply; sewerage; waste management and remediation activities 0.0 0.8

In June 2014, the export price index changed by 0.4% compared to May 2014 and by –1.9% compared to June 2013.

In June, compared to the previous month, the prices of oil products, wood and wood products and metals increased more than average, whereas the prices of beverages, electricity, textiles and food products decreased more than average.

In June 2014, the import price index changed by 0.1% compared to May 2014 and by –1.2% compared to June 2013.

In June, compared to the previous month, the prices of electricity, oil products and metals increased more than average, whereas the prices of agricultural products, leather products and building materials decreased more than average.

Source: Statistics Estonia

Companies’ increased foreign borrowing led to greater indebtedness in 1Q

The debt liabilities of Estonian companies (loans and issued debt securities) grew by 1.4% in the first quarter compared to last year. Over the quarter, total corporate debt increased by 444 million euros, which is one of the largest quarterly growths of the past years. The majority of the growth was caused by an increase in foreign borrowing; a significant part of the latter was made up of the issue of new bonds in the infrastructure sector. The share of foreign debt liabilities in total corporate debt increased somewhat and reached 37% by the end of the quarter.

Corporate leverage remained unchanged in the first quarter, as both equity and debt continued to grow. The debt-to-GDP ratio, which had been decreasing for a year, went up slightly over the quarter – from 85% to 87%.

The financial assets of households are still increasing at a faster pace than debt liabilities. Compared to last year, households’ financial assets increased almost 10% in the first quarter, while the growth of debt liabilities picked up speed and reached 1.2%. The indebtedness of households as a ratio to GDP remained at 41%.

The Estonian economy as a whole was a net borrower in the first quarter. This means that more funds were taken in from abroad than invested there. A negative balance is quite typical of the first quarter, but larger than usual corporate foreign borrowing also had a considerable impact.

Source: Bank of Estonia

Author:  Jana Kask, Deputy Head of the Financial Stability Department of Eesti Pank