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Economic growth in the euro area remained high in the third quarter but available indicators suggest that it will weaken towards the end of the year. According to Eurostat's first estimate, GDP rose by 2.2% compared to the second quarter (by 2.1% in the first quarter) and private consumption continued to be the main driver of growth. According to available indicators, growth in economic activity in the euro area will slow down in the last quarter amid worsening supply bottlenecks, high energy prices, inflationary pressures and the renewed spread of the epidemic. In October, the EC and IMF forecast growth of 5% for the euro area economy this year, slowing to 4.3% next year.

Some indicators suggest that the growth of economic activity in Slovenia weakened in the third quarter, especially in the export-oriented sectors of the economy, while domestic consumption increased. Trade in goods declined in the third quarter, while manufacturing output growth slowed, which we believe is related to supply chain disruptions. Construction activity fluctuates strongly from month to month and remained below the comparable 2020 level in August, mainly due to unfavourable trends in non-residential construction. Turnover in trade increased in August. In most sectors, turnover in the first eight months of the year combined was higher than in the same period of 2019. Turnover in market services also increased in August, and turnover in accommodation and food service activities has been rising strongly for several months, although it is still lower than in the same period in 2019. In current terms, household consumption strengthened in the summer months, mainly in tourism-related services. Electricity consumption in October was roughly on par with the same periods in 2019 and 2020, while the year-on-year growth in freight traffic volumes on Slovenian motorways slowed somewhat. According to data on the fiscal verification of invoices, turnover growth in October was higher year-on-year, mainly as a result of last year's low turnover following the introduction of stricter containment measures in the autumn months.

Uncertainty in the international environment, mainly due to supply chain disruptions, and regarding the future development of the COVID-19 epidemic most likely contributed to the deterioration of the economic sentiment indicator in October as well. Nevertheless, most confidence indicators remain higher than a year ago.

Labour market conditions remain good. Employment remained at a similar level in August as in the previous two months and the number of employed persons increased by 0.7% year-on-year in the first eight months. The number of unemployed fell by a fifth in October compared to a year earlier and by almost a tenth compared to October 2019. The monthly increase in the number of unemployed in October largely reflects seasonal trends related to a higher inflow of first-time job seekers into unemployment. Compared to last year, however, youth unemployment has declined. In August, the year-on-year increase in average wages was lower than in previous months. In the public sector, high growth related to the payment of epidemic-related bonuses was followed by a slowdown. 

Year-on-year consumer price growth (3%) increased in October on the back of high growth of energy prices, as did growth in Slovenian industrial producer prices (8.6%) in September. About two-thirds of the year-on-year inflation was due to higher prices for petroleum products and heat energy. In the face of higher commodity and energy prices and supply chain disruptions, the increase in durable goods prices strengthened further (especially car prices). Industrial producer prices in domestic and foreign markets are also rising rapidly. Overall growth continues to be driven mainly by higher prices of intermediate goods and capital goods. Higher prices for intermediate goods and production bottlenecks also affect consumer goods price growth, which is still relatively low. Prices of other energy sources, especially natural gas, are also rising sharply in global markets, which has an important impact on the rise in electricity prices in Europe. 

The overall deficit of the consolidated balance of public finance was higher in the third quarter than in the second, amounting to EUR 2,085 million in the first nine months, which is lower than a year ago. Year-on-year revenue growth, which was very high in the second quarter due to last year’s low base, slowed in the third quarter, while year-on-year expenditure growth was slightly higher than in the second quarter (mainly due to a slower decline in subsidies and stronger growth in investment and payments to the EU budget). Expenditure on measures to mitigate the consequences of COVID-19 was lower in the third quarter than in the same period last year and, as many measures expired, also significantly lower than in the first and second quarters of this year. In the first nine months of this year, expenditure on these measures was EUR 775 million higher than in the same period last year. 

In the Selected topic of the Slovenian Economic Mirror, we focused on the solvency of business entities during the COVID-19 epidemic. We estimate that the solvency indicators of Slovenian business entities for 2020 and 2021 do not yet reflect the magnitude of the epidemic's impact. We believe that this is due to a series of government intervention measures to mitigate the impact of the epidemic in 2020 and 2021.