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The weak recovery of economic activity in the euro area continues; in January, the exchange rate of the euro declined significantly; oil prices reached their six-year lows. Production volume in manufacturing and turnover in retail trade in the euro area rose again in November, while the value of construction put in place remained similar to that in previous months (seasonally adjusted). Confidence and business climate indicators still show a continuation of weak recovery. In January, the IMF lowered slightly its GDP growth forecasts for the euro area (to 1.2%) in light of the moderation of activity in some key partners. In order to stabilise the economy and meet its objective of price stability in the euro area, the ECB will start buying euro area government and corporate bonds in March (in the total amount of EUR 1,140 bn in the period through September 2016). The exchange rate of the euro against main world currencies plummeted in January in anticipation of these measures.

The short-term indicators of economic activity in Slovenia that are based on foreign demand developments have remained unchanged in recent months, while the indicators relying on domestic demand are falling. After rising further in the third quarter, real merchandise exports and production volume in manufacturing remained unchanged in November and exceeded their levels of November 2013. Turnover in retail trade and construction activity have been dropping in recent months (since mid-year), and were down year-on-year in November.

The labour market situation continues to improve; November’s extraordinary payments were up year-on-year for the first time since the beginning of the crisis. The number of persons in employment rose again in November (seasonally adjusted), and was up 6,825 year-on-year in the first eleven months. It was higher than a year earlier in most activities, the improvement also being indicated by growth in employment activities leasing labour, mainly in the construction and manufacturing sectors, according to our estimate. With increased hiring, the number of registered unemployed fell again in January (seasonally adjusted). At the end of the month, it stood at 124,279, which is 4.3% less than a year earlier. Average gross earnings per employee in the first eleven months were up year-on-year in most private sector activities and in the entire public sector. The 13th month payments or Christmas bonuses were paid to slightly more employees than a year earlier, but the average amount of payments remained the same. 

After subdued growth in 2014, prices were down year-on-year in January (-0.5%).  Deflation was mainly due to lower prices of energy and unprocessed food, but it was also attributable to lower prices in most other price groups. Prices of services were up (0.5 percentage points), but their contribution declined due to the fading of the base effect. Prices in the euro area were also lower year-on-year (-0.6%).

Bank lending activity continues to decline. The volume of loans to domestic non-banking sectors – excluding the transfer of claims to the BAMC (in the amount of EUR 1.6 bn) – declined by EUR 1.8 bn in 2014, by around one tenth less than in 2013. Lending to the government is rising, while the volume of corporate, NFI and household loans is falling. Foreign currency loans, the bulk being in Swiss francs, amounted to EUR 1.2 bn at the end of 2014, which is less than 5% of all loans (of which, more than two thirds are household loans). Their volume dropped by around 60% from its October 2008 peak as a result of deleveraging and conversion into euro loans. Household and government deposits rose in 2014, while banks continued to reduce liabilities to the rest of the world and the ECB.

The general government deficit in the first eleven months of 2014 amounted to EUR 1.221 bn, down EUR 349.7 m from the same period of 2013. The lower deficit is attributable to higher tax revenues, one-off non-tax revenues and higher inflows from the EU budget. General government expenditure was up year-on-year as a result of by around a third higher interest payments and capital expenditure. Salaries, wages and other personnel expenditures including social contributions were close to the level of the same period of 2013, while other major categories were down year-on-year.

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