FM: The fall in exports in May was significantly affected by the decline in re-exports

The value of Latvian exports of goods in May of this year was 2.6% lower than in the corresponding month of the previous year, which was mainly influenced by a significant decrease in the re-export of machinery and mechanical appliances. Meanwhile, exports of goods produced in Latvia continued to show growth. Data on exports of manufacturing output show that in May the Latvian manufacturing industry's export turnover was 2.7% higher than in May of the previous year. Although Latvian producers continue to grow their export turnover, the fixed increase in May is the lowest since mid-2017, and the growth rate is generally decreasing for the fourth consecutive month. This points to a decline in external demand and confirms the already strong outlook for export growth this year to be significantly lower than last year.

The largest decline in the value of exports in May was recorded in exports of machinery and mechanical appliances, which decreased by 47.3% compared to May of the previous year. This was due to a 98.2% or 56.3 million euro decline in re-exports of turbojet engines. The decline in exports of these goods is due to the renewal of the Latvian national airline fleet and, accordingly, its technical service, when in May last year aircraft engines worth 57.3 million euros were returned to the factory for a technical inspection.

In May this year, for the first time in the past year and a half, the value of exports of wood and articles of wood fell by 7.3% compared to the corresponding month of the previous year. The wood products export group is one of the largest and relatively well diversified both in terms of products and countries. However, the fact that the largest drop in exports of this group of goods is recorded in the United Kingdom is 25.7%. This explains three quarters of the decline in the value of wood exports. It is also remarkable that wood exports to the United Kingdom have fallen in all major groups, namely, particle board, plywood and the most long-sawn timber. The decline in wood exports was also recorded in Finland, Turkey, Poland and Germany. However, timber exports increased to Estonia, Lithuania and Sweden.

Building confidence builder in the European Union (EU), which characterizes the demand for construction materials, metals and timber, including timber in the EU, is firmly above the zero mark, suggesting that demand for these materials is relatively strong, although the dynamics of the indicator over the last years has been declining . However, the main influencing factor in the decline in wood exports in May is not directly related to demand, but more to the reduction in wood prices on world stock exchanges. This is evidenced by the fact that the physical volume of timber exported from Latvia in May this year was higher than a year ago.

The value of exports of iron and steel products fell by 17.5%, mainly driven by a fall in exports of iron waste and scrap to Turkey.

Among other commodity export groups, it should be noted that agricultural and food exports grew by 12.3%. It is noteworthy that for half of the agri-food group's exports, the value of exports fell in May this year (for fish, vegetables, fruit products, alcoholic beverages), but the increase in cereal exports increased the total exports of this group three times. So strong growth in cereal exports is mainly due to the low base last year. Exports of cereals in the first five months of this year were 26.5% higher than in the corresponding period of the previous year. However, it is too early to assess the future performance of cereal exports, which will largely depend on this year's harvest. Traditionally, most cereals are exported directly in the autumn months, when in one month the value of cereal export can exceed the export value several times in other months of the year. Exports of dairy and mill products as well as plant seeds increased from other food products in May.

In June of this year, Latvian industry's assessment of export orders was relatively stable and remained at the level of previous months. However, as global economic growth weakens and external demand declines as well as the impact of falling prices on individual commodities, the growth rate of Latvian commodity exports is also diminishing, as evidenced by export data for the first five months of this year - exports of goods alone were 2.1% higher than the same period last year. In the first five months of 2018, exports of goods increased by 11.7%.



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