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Economic sentiment indicators for the third quarter suggest activity growth in the euro area and in Slovenia’s main trading partner, Germany. The composite Purchasing Managers’ Index (PMI) for the euro area points to further expansion of activity in the third quarter, reaching in September its highest level since May 2024. The services PMI strengthened in September, while the manufacturing PMI declined slightly but remained above the 50-point threshold that separates growth from contraction. Germany’s composite PMI rose in September to its highest level in 16 months, and the quarterly average also pointed to recovery in activity growth. The Economic Sentiment Indicator (ESI) for the euro area also improved slightly in September, reflecting stronger confidence among consumers and in construction. On average, the indicator in the third quarter was higher than in the second quarter, but it remained lower year-on-year. According to the IMF’s October outlook, growth in the euro area is expected to reach 1.2% this year and 1.1% in 2026. Similar projections were made by the ECB and the OECD in September. Growth will be driven by private consumption and higher government spending on infrastructure and defence, particularly in Germany, where growth is expected to strengthen noticeably next year (0.2% growth in 2025 and 0.9% growth in 2026).

The available economic indicators for Slovenia in recent months point to several positive developments in the export sector. Manufacturing output has been strengthening across all groups of industries by technological intensity (seasonally adjusted) since mid-year; however, after the first eight months, it remained slightly below the level recorded in the same period last year. The year-on-year decline was largest in the manufacture of motor vehicles, trailers and semi-trailers, and in the metal industry. Total orders in manufacturing also remained at a low level in September, while production expectations improved slightly. Goods exports and imports (excluding operations involving processing) declined month-on-month in August after real growth in July. On average, in the first eight months of the year, exports were lower year-on-year, while imports remained broadly unchanged compared with the same period last year. After declining in the second half of 2024, Slovenia’s goods export share in the EU market has stabilised on a quarter-on-quarter basis this year, though it remained slightly lower year-on-year in the first half of 2025. The market share of road vehicles recorded the sharpest decline, which is also related to the restructuring of production at Slovenia’s largest vehicle manufacturer and consequently to lower exports to France and Italy. Year-on-year declines were also recorded in the shares of various finished products, chemical products (excluding pharmaceuticals), metal products, and, to a lesser extent, for some other important export categories (electrical equipment and other machinery and equipment). The year-on-year growth in the market share of pharmaceutical products and several energy-intensive products (non-metallic mineral products, metals) continued. Among Slovenia’s main trading partners, a notable decline in the market share was recorded in France (mainly due to lower exports of road vehicles), with declines also observed in Croatia, Germany, and Italy, while the share increased in Austria. 

Activity growth in construction strengthened in the third quarter, while growth in household consumption, according to various indicators, moderated during this period. Economic sentiment improved for the third consecutive month in September. After a decline in the first quarter, construction activity strengthened over the remainder of the year and in August was significantly higher than in the same month a year earlier. Total real turnover in market services declined further in July after contracting in the second quarter and was roughly at the same level as in the same month last year. In the first seven months, year-on-year growth in turnover was recorded only in transportation and storage as well as in professional and technical activities. Despite weaker performance in most sectors in July, turnover in trade remained higher year-on-year across all sectors in the first seven months of the year. At the beginning of the third quarter, households spent significantly more than a year earlier on purchases of new passenger cars; turnover in retail trade in non-food products and spending on tourism services abroad also increased. They spent less than last year on food and beverages, and the number of overnight stays by domestic residents in Slovenia also declined. The nominal value of fiscally verified invoices (a proxy for sales of final goods and services) was 3% higher year-on-year in the third quarter, which represents a somewhat more moderate increase than in the second quarter. Credit activity has also contributed in recent months to higher consumption of durable goods and to increased activity in the real estate market. Growth in housing loans has been gradually strengthening, while growth in consumer loans, though moderating, remains high. Economic sentiment improved further in September, driven by higher confidence in almost all activities (except services) and among consumers. 

After declining at the end of last year, the number of persons in employment remained broadly stable up to August this year, while the number of unemployed rose in September for the third consecutive month (both seasonally adjusted), mainly due to a higher inflow of citizens with temporary protection status into the unemployment register. Year-on-year wage growth in July was somewhat lower than in the preceding months. In August, the number of persons in employment remained broadly unchanged relative to previous months and was 0.4% lower year-on-year. Employment remained below the level recorded a year earlier mainly in administrative and support service activities, construction, and manufacturing, while it increased in public service activities. The number of unemployed increased in September (by 0.5%, seasonally adjusted), mainly due to a higher inflow of citizens with temporary protection status into the unemployment register. The number of unemployed was also marginally higher year-on-year (by 0.2%). Year-on-year nominal growth in the average gross wage was slightly lower in July than in the preceding months. In the public sector, following strong growth driven by the implementation of the pay reform at the beginning of the year, year-on-year growth moderated in the last two months, while in the private sector it remained broadly unchanged. In the first seven months, the overall average gross wage increased by 4.8% in real terms (by 7% in nominal terms) – by 7.7% in the public sector (by 9.9% in nominal terms) and by 3.2% in the private sector (by 5.3% in nominal terms).

Year-on-year inflation eased slightly in September (2.6%), mainly due to slower growth in clothing and footwear prices, while higher food and non-alcoholic beverage prices (7%) continued to contribute the most to inflation. Year-on-year growth in service prices, which stood at 2.8%, has fluctuated around 3% since the beginning of the year. Measured by the HICP, year-on-year inflation in September stood at 2.7%, which was 0.5 p.p. higher than in the euro area. According to preliminary data, much of this difference continues to result from markedly higher growth in food, alcohol, and tobacco prices (6.2% in Slovenia compared with 3% in the euro area). Slovenian industrial producer prices rose slightly month-on-month in August, while year-on-year growth moderated further due to a higher base. Consumer goods prices recorded the strongest growth, with price growth in the manufacture of food products gaining momentum. Relatively higher growth in Slovenian industrial producer prices, together with the appreciation of the euro, also affected price competitiveness, which further deteriorated in the third quarter.

With more moderate revenue growth and stronger growth in expenditure on wages and investment, the deficit of the consolidated general government balance has, as expected, increased this year. In the first eight months of this year, it amounted to EUR 1,066 million, which is EUR 688 million more than in the same period last year. Revenues in the first eight months rose by 4.3%, compared to a 11.9% increase in the same period last year. The slowdown is related to cyclical factors and to measures that boosted the growth of social contributions and certain tax revenues last year. Expenditure in the first eight months of this year rose by 8.0% year-on-year, compared to an 8.8% increase in the same period last year. This year, expenditure growth has been driven more than last year by higher compensation of employees due to the implementation of the public sector pay reform, investment spending, and payments to the EU budget. The bulk of the consolidated general government deficit stems from the central government budget deficit. In the first eight months of this year, the latter amounted to EUR 1,068 million, while according to preliminary data, it was somewhat lower in the first nine months (EUR 953 million). By the end of the year, the deficit is expected to increase, as planned. Revenue growth is nevertheless expected to strengthen by year-end, supported by receipts under the Recovery and Resilience Plan and by non-tax revenues (from profits of state-owned enterprises), which declined year-on-year in the first eight months. At the same time, investment expenditure is also expected to accelerate.