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The National Economy and Prices
The quarter-on-quarter increase in the consumer price index (CPI) was 1.0%. In January and March, the CPI rose also above the previous period's level (by 0.6% and 0.5%, respectively). Nevertheless, the annual rate of inflation was considerably below the level in the first quarter of 2000. The CPI rose also compared with the first quarter of 2000 (by 1.1%). In March, the annual rate of inflation was 1.4%, but the rate of core inflation was 0.8% (see Chart 1). The year-on-year decline in inflation was attributable to less marked increases in administratively regulated prices and fuel prices.
Chart 1
(year-on-year basis; %)
Annual rate of consumer price inflation
Annual rate of core inflation
The January increase in administratively regulated prices was driven by growth in prices of water supply and postal services; however, price increases were smaller than at the beginning of 2000, because tax rates were not raised. Influenced by the weakening of the US dollar and world market trends, fuel prices continued to fall in January and February. They were 2.5% below the previous quarter's level. Changes in the prices of goods were determined by rising prices of food, medicine and used automobiles as well as falling prices of communication, clothing and footwear.
Compared with the first quarter of 2000, the prices of goods rose by 0.6%, and those of services, by 2.9%.
In the first quarter, the export unit value increased by 4.0% compared with the previous quarter. This was mainly a result of growth in the export unit value of dominant product groups: wood and articles of wood (3.4%), textiles and textile articles (5.1%), base metals and articles of base metals (2.2%), and miscellaneous manufactured articles (mainly furniture; 5.1%). The export unit value decreased in machinery and mechanical appliances, electrical equipment (by 1.7%) and prepared foodstuffs (including alcoholic and non-alcoholic beverages and tobacco products; by 0.8%).
Year-on-year growth in the export unit value was 1.8%. The indicator increased in base metals and articles of base metals (by 9.3%), products of the chemical and allied industries (by 6.2%) and other product groups, whose share in total exports was smaller. At the same time, the export unit value declined in a number of principal export product groups: wood and articles of wood (by 0.9%), textiles and textile articles (by 0.3%), machinery and mechanical appliances, electrical equipment (by 6.1%), miscellaneous manufactured articles (mainly furniture; by 8.9%). Given the slight increase in the export unit value, real exports grew (by 9.1%).
Compared with the previous quarter, the import unit value increased (by 1.7%) due to increases recorded in vegetable products (14.9%), products of the chemical and allied industries (11.3%), textiles and textile articles (10.3%) and transport vehicles (7.3%). The import unit value considerably declined in mineral products (by 15.3%) and machinery and mechanical appliances, electrical equipment (by 1.8%), which are significant import product groups.
A year-on-year increase of 3.5% in the import unit value resulted from growth recorded for vegetable products (14.9%), products of the chemical and allied industries (14.7%), mineral products (4.8%), base metals and articles of base metals (4.2%), and textiles and textile articles (3.5%). The only product group whose import unit value declined slightly was prepared foodstuffs (including alcoholic and non-alcoholic beverages and tobacco products; by 0.4%). Real imports increased by 12.6%.
As the export unit value rose at a more rapid pace than the import unit value, there was a quarter-on-quarter improvement in the terms of trade (2.3%). The terms of trade deteriorated by 1.6% compared with the first quarter of 2000, as the import unit value increased more markedly.
Construction prices fell compared with the first quarter of 2000 and the previous quarter (by 3.4% and 2.5%, respectively). The principal quarter-on-quarter decreases in construction prices were observed in the construction of underground pipelines (4.2%), industrial, agricultural and trade objects (2.8%), and educational and health care objects (2.8%). The most marked year-on-year decreases in construction prices were also reported in two of the above groups—underground pipelines and industrial, agricultural and trade objects (9.3% and 6.0%, respectively). The downward trend of construction prices was a result of falling prices of construction materials and wages in the construction sector.
Producer price growth in manufacturing (0.7%), mining and quarrying (0.7%), and electricity, gas and water supply (0.5%) led to a quarter-on-quarter rise of 0.7% in the producer price index. Compared with the first quarter of the previous year, producer prices rose in manufacturing (by 0.5%), and mining and quarrying (by 0.5%), while falling in electricity, gas and water supply (by 0.8%). As a result, a year-on-year increase of 0.5% was reported in the producer price index.
Annual GDP growth (at constant prices) was 8.7% in the fourth quarter of 2000 and 6.6% in 2000. The rapid growth of the fourth quarter was attributable to rising value added in all principal sectors of the national economy. Value added increased by 10.2% in the service sector and by 6.6% in the goods-producing sector.
The value added of the goods-producing sector increased due to substantial growth in manufacturing (7.2%), construction (15.7%), forestry, logging and related service activities (25.2%), and mining and quarrying (26.9%).
In the service sector, value added grew in trade (by 14.3%), transport, storage and communications (by 13.8%), real estate, renting and business activities (by 12.7%), financial intermediation (by 11.2%), and other community, social and personal service activities (by 9.1%).
Upon announcing GDP data for the fourth quarter of 2000, the Central Statistical Bureau of Latvia released the revised data on annual GDP growth at constant prices in the first three quarters of 2000. In the above periods, annual GDP growth was 6.1%, 5.0% and 6.6%, respectively.
In the fourth quarter of 2000, gross capital formation showed the largest growth of all domestic demand components (see Chart 2; 15.4% at constant prices); however, the high growth rate was largely attributable to the low basis level. In the fourth quarter, gross capital formation accounted for 32.9% of GDP at current prices.
Chart 2
(at constant prices; year-on-year basis; %)
Gross domestic product
Private consumption
Government consumption
Gross capital formation
Exports
Imports
In the fourth quarter of 2000, private income rose at a more rapid pace than consumer prices, accelerating growth in purchasing power, which directly influenced the retail trade turnover, private saving and other indicators. Final consumption expenditure of households, which constituted 59.7% of GDP, increased by 4.6%.
The difference between imports and exports decreased, as real exports increased more substantially than real imports: in the fourth quarter of 2000, exports of goods and services at constant prices increased by 8.7%, and imports, by 5.4%.
In the fourth quarter of 2000, non-financial investment (at current prices) made in the economy amounted to 317.2 million lats, showing a quarter-on-quarter increase of 46.5% and a year-on-year increase of 26.7%. Of non-financial investment, 68.2% was made in the service sector. The bulk of such investment went to transport, storage and communications (74.3 million lats), trade (37.4 million lats), and public administration and defence, and compulsory social security (34.2 million lats). Of non-financial investment in the goods-producing sector, the largest investment was made in manufacturing (43.2 million lats), and electricity, gas and water supply (43.4 million lats).
Of non-financial investment in manufacturing, 26.1 million lats or 60.4% was used for technological machinery and equipment. A large part of non-financial investment in manufacturing went to the manufacture of food products and beverages (14.5 million lats or 33.6%) and the manufacture of wood and products of wood and cork (except furniture; 13.0 million lats or 30.1%).
In 2000, non-financial investment totalled 886.7 million lats (a year-on-year increase of 23.0%). Such investment amounted to 203.6 million lats in transport, storage and communications, 136.0 million lats in manufacturing, 104.7 million lats in trade and 96.4 million lats in public administration and defence, and compulsory social security. Particularly rapid increases in non-financial investment were recorded in smaller sectors: hotels and restaurants (4.9 times), financial intermediation (2.2 times), real estate, renting and business activities (2.0 times) and other community, social and personal service activities (1.9 times).
With demand on the rise, output grew in manufacturing (for the volume index of industrial output in selected sectors of manufacturing, see Chart 3). Compared with the first quarter of 2000, the output of manufacturing rose by 10.2%. The output of electricity, gas and water supply did not change substantially, while that of mining and quarrying declined by 6.6%. At constant prices, the volume index of industrial output rose by 7.5% compared with the first quarter of 2000.
In manufacturing, the most marked growth in output was observed in the manufacture of radio, television and communication equipment and apparatus (51.9%), the manufacture of electrical machinery and apparatus not elsewhere classified (35.3%), the manufacture of other non-metallic mineral products (42.4%), the manufacture of fabricated metal products (except machinery and equipment; 21.6%), the manufacture of pulp, paper and paper products (21.7%), and the manufacture of rubber and plastic products (21.3%). Output substantially increased in the manufacture of textiles (by 11.5%), the manufacture of wearing apparel, dressing and dyeing of fur (by 13.2%), the manufacture of wood and products of wood and cork (except furniture; by 11.6%), the manufacture of furniture and manufacturing not elsewhere classified (by 18.0%), and the manufacture of food products and beverages (by 6.8%).
Chart 3
(year-on-year basis; %)
Manufacture of pulp, paper and paper products
Manufacture of furniture; manufacturing n.e.c.
Manufacture of other non-metallic mineral products
Manufacture of wood and of products of wood and cork, except furniture
Manufacture of fabricated metal products, except machinery and equipment
Manufacture of electrical machinery and apparatus n.e.c.
The only sectors where output decreased were the manufacture of chemicals, chemical products and man-made fibres (by 11.4%), the manufacture of other transport vehicles (by 20.9%) and recycling (by 45.9%).
At the Ventspils port, the transit of oil products continued to increase significantly. Likewise, loose bulk freight loaded and unloaded at this port grew considerably. As a result, a year-on-year increase of 7.2% was reported in cargoes loaded and unloaded at the Ventspils port. Cargoes loaded and unloaded at the Riga port grew by 10.7%, as loose bulk freight and liquid cargoes increased. The indicator also rose rapidly at the Liepaja port (by 11.9%). A still more rapid increase was observed in cargoes loaded and unloaded at small ports (52.5%). Hence, cargoes loaded and unloaded at Latvian ports showed a year-on-year increase of 8.9% (see Chart 4).
Chart 4
(year-on-year basis; %)
Total
Ventspils port
Riga port
Liepaja port
Given year-on-year growth of 8.7% in transit by rail, cargo traffic by rail increased by 4.2%.
Meat, milk and egg production declined compared with the first quarter of 2000 (by 11.4%, 3.4% and 1.0%, respectively). A considerable year-on-year increase was observed in buying prices. The buying prices of meat increased by 26.5% in January, by 25.5% in February and by 31.8% in March. At the same time, the buying prices of milk did not show year-on-year changes in January, but rose in February and March (by 2.1% and 5.4%, respectively).
In the first quarter, the retail trade turnover (at constant prices) rose by 13.9% (for monthly changes in the indicator, see Chart 5). The largest year-on-year growth in the retail trade turnover was in enterprises engaged in retailing of non-food (47.9%), sales of motor vehicles, motorcycles and parts thereof (including wholesale; 38.9%), and retail trade of automotive fuel (26.4%). At the same time, the retail trade turnover declined in enterprises engaged in retailing of textile fabrics, clothing, footwear and leather ware (by 6.1%).
Chart 5
Total
Sales of motor vehicles, motorcycles and parts thereof (including wholesale trade)
Retail trade of automotive fuel
Retailing of food, beverages and tobacco in specialized stores
Retailing of furniture, lighting fixtures, household devices, electrical devices, radio, TV goods, paints, glassware etc.
Retailing of books, newspapers, stationery and the like in specialized stores
The turnover of public catering rose by 12.0% above the level in the first quarter of 2000.