News

Economic growth in the euro area accelerated in the first quarter and GDP was 2.5% higher y-o-y. GDP growth in the euro area strengthened in the first quarter (0.8%, seasonally adjusted) particularly as a result of high growth in Germany and France. GDP was 2.5% higher y-o-y. In line with the expectations of international institutions, an increasingly important driver of growth is domestic demand, particularly investment in machinery and equipment, with net exports continuing to make a significant contribution to growth. Consistent with forecasts by international institutions, short-term indicators of economic activity and confidence indicators indicate a slowdown of growth during the year. The worst economic situation is still recorded in countries with the greatest public finance problems, where the yield to maturity of government bonds increased again in May. Commodity prices declined in May, but remained much higher than in the same period of last year.

The recovery of Slovenia’s economy, stimulated by exports, continued in the first quarter and GDP was 2.0% higher y-o-y. Growth in economic activity eased in Slovenia, unlike in the euro area, as GDP rose by 0.3% (seasonally adjusted) relative to the last quarter of 2010, when it increased by 0.5%. Y-o-y, the greatest contribution to the economic recovery continued to come from exports, which were up 10.6% in real terms. Imports recorded even higher growth (11.1%), so that the contribution of net exports was negative (-0.2 p.p.). Growth in domestic consumption was again significantly impacted by the movement of inventories, which contributed 2.3 p.p. to y-o-y GDP growth. Household consumption and government consumption recorded lower y-o-y growth (1.2% and 2.2%, respectively). Y-o-y growth in machinery and equipment remained high (17.5%), as expected, while construction investments continued to decline strongly y-o-y (-22.6%). Broken down by activities, y-o-y growth in value added was again the highest in manufacturing (10.0%), while the worst results were still recorded in the construction sector (-19.9%). Financial and insurance activities have also not seen any signs of recovery yet.

Following a significant deterioration at the end of last year, the labour market conditions stabilised after January 2011. The average number of employed persons according to the statistical register decreased further in the first quarter (-1.0%, seasonally adjusted), mainly as a result of a pronounced decline in December 2010, while the number of employed persons remained roughly at the achieved (low) level in the first three months of this year. Similar movements were recorded for the number of registered unemployed persons, which dropped in March and April, after still rising at the end of last year and at the beginning of 2011. At the end of April, the number of unemployed persons (111,561) was nevertheless still much higher than in the same month of 2010 (12,245 or 12.3%).

The increase in the average gross wage in March was below the long-term average, while y-o-y growth dropped to the level recorded before last year’s increase in the minimum wage. The March increase in the private sector was more modest than usual, as this year, the bulk of extraordinary payments for business performance in the previous year had already been paid with wages for February. For this reason, and particularly because of last year’s increase in the minimum wage, the y-o-y growth of private sector wages slowed considerably (from 5.8% in February to 1.8% in March). In the public sector, wages remained roughly unchanged in March.

Consumer prices rose by 0.8% in May. Y-o-y inflation increased to 2.2%. In May, price movements mainly reflected the usual seasonal fluctuations. Prices of fruit increased more than expected, which contributed 0.3 p.p. to inflation. In the first five months of the year, price growth (2.4%) was crucially impacted by prices of food (a contribution of 1.1 p.p.) and energy. Y-o-y inflation in the euro area totalled 2.7% in May.

The volume of domestic non-banking sectors’ loans with domestic banks strengthened in April, after two months of decline, but recorded modest growth. The volume of corporate and NFI loans otherwise increased in April, but the strengthening was mainly underpinned by household loans. However, the volume of these loans also remained low. In the first four months, non-banking sectors net repaid EUR 10.5 m in loans taken out in domestic banks, which was a result of net repayments by the government; households net borrowed only close to one tenth and enterprises and NFIs just over 2% of the amounts recorded in the same period of 2010. In contrast to the same period of last year, NFIs recorded net borrowing abroad in the first three months of this year, raising loans worth EUR 116.5 m. Bank sources remained fairly limited, given that banks were still net repaying foreign deposits and loans in April (in the amount of just below EUR 300 m), while the outflow of government deposits was nearly at the level of the net inflow in the previous month and household deposits recorded a net outflow again.

According to the consolidated balance of the MF, the general government deficit amounted to EUR 503 m in the first two months of this year, 14.9% more than in the same period of last year. In the first two months, revenue was 3.7% and expenditure 5.5% higher y-o-y. All categories of general government expenditure were up y-o-y, except expenditure on capital and capital transfers (-20.3%), where the decline was largely a consequence of the high level in the same period of last year. The largest y-o-y increase was recorded for expenditure on interest payments (36.9%).