.^'IMAD O fü Q) £ u £ o o Ü) o u 0) > fN CD fN fO ^ C fO Slovenian Economic Mirror ISSN 1318-3826 No. 1 / Vol. XVIII / 2012 Publisher: IMAD, Ljubljana, Gregorčičeva 27 Responsible Person: Boštjan Vasle, MSc, Director Editor in Chief: Jure Brložnik, MA Authors of Current Economic Trends (listed alphabetically): Barbara Ferk, MSc, Marjan Hafner, Matevž Hribernik, Slavica Jurančič, Jasna Kondža, Janez Kušar, Mojca Lindič, MSc, Urška Lušina, MSc, Jože Markič, PhD, Tina Nenadič, MSc, Judita-Mirjana Novak, Jure Povšnar, Ana T. Selan, MSc, Dragica Šuc, MSc , Mojca Koprivnikar Šušteršič, Miha Trošt Editorial Board: Lidija Apohal Vučkovič, Marijana Bednaš, MSc, Lejla Fajič, Alenka Kajzer, PhD, Rotija Kmet Zupančič, MSc, Janez Kušar, Boštjan Vasle, MSc Translator: Marija Kavčič Data Preparation and Graphs: Bibijana Cirman Naglič, Marjeta Žigman Concept and Design: Katja Korinšek, Pristop DTP: Bibijana Cirman Naglič Print: Circulation: 90 copies © The contents of this publication may be reproduced in whole or in part provided that the source is acknowledged. Contents In the spotlight................................................................................................................................................................3 Current economic trends..............................................................................................................................................5 International environment...............................................................................................................................................7 Economic activity in Slovenia..........................................................................................................................................8 Labour market..................................................................................................................................................................14 Prices..................................................................................................................................................................................17 Balance of payments.......................................................................................................................................................19 Financial markets.............................................................................................................................................................21 Public finance....................................................................................................................................................................23 Boxes Box 1: The volume of road and rail freight transport..................................................................................................8 Box 2: Electricity production and consumption balance ........................................................................................17 Box 3: (In)solvency.............................................................................................................................................................8 Box 4: 13'h month payments and Christmas bonuses..............................................................................................17 Statistical appendix.....................................................................................................................................................27 On January 2008, the new classification of activities of business entities NACE Rev.2, which replaced NACE Rev. 1.1, came into force in all EU Member States. In the Republic of Slovenia, the national version of the standard classification, SKD 2008, which includes the entire European classification of activities but also adds some national subclasses, came into force on the mentioned date. In the Slovenian Economic Mirror, all analyses are based on the SKD 2008, except when the previous SKD 2002 classification is explicitly referred to. More general information about the introduction of the new classification is available on the SORS website http://www.stat.si/eng/ skd nace 2008.asp. All seasonally adjusted data in the Economic Mirror are calculations by IMAD. In the spotlight Amid a steady deterioration of economic conditions and continued tensions on financial markets, at the end of January the IMF also cut its forecast for euro area economic growth in 2012. Economic activity in the euro area slowed further in the last few months of 2011 and confidence indicators show a continuation of these unfavourable trends. The conditions on government bond markets and on the interbank market remain tight. The IMF also revised downwards its forecasts for this year in January, as some other international institutions in previous months. It predicts a 0.5% contraction of the euro area economy in 2012, emphasising significant downside risks to growth. If the sovereign debt crisis continues to deepen, economic activity in the euro area could even be 4.0% lower than the current forecast, according to the IMF estimate. October's and November's movements of short-term indicators indicate a moderation of economic activity in Slovenia in the last quarter of 2011. Real merchandise exports remained below the Q3 level, on average, in October and November. Having already dropped mid-2011, the real volume of manufacturing production remained unchanged in the autumn months. Construction activity stagnated at very low levels from July to November. Real turnover in retail trade shrank somewhat in November, after subdued growth in the summer months, but the decline was mitigated by growth in turnover in automotive fuels. The business climate, which has deteriorated since mid-2011, also did so in January. Labour market conditions continued to worsen at the end of the year; November's wage movements were marked by the disbursement of 13th month payments and Christmas bonuses, but they were the lowest in six years. The number of persons in employment excluding self-employed farmers dropped further in November, seasonally adjusted, in our estimate mainly as a result of the decline in construction. Registered unemployment increased again in December, totalling 112,754 persons at the end of the year, 2.5% more than at the end of 2010. In the public sector, the average gross wage fell slightly in November, according to seasonally adjusted data, while it maintained October's level in the private sector. According to original data, the average gross wage in the latter otherwise rose as a result of 13th month payments and Christmas bonuses, but they were the lowest in six years. The share of recipients and the average amount per recipient were both lower than in 2010. The share of employees who received extraordinary payments remained largest in activities that have the highest average wages anyway and where the state has a large ownership share (electricity and gas supply, mining, water supply and financial and insurance activities). Last year, consumer prices in the euro area increased more than in 2010 and more than in Slovenia. The key reason for higher inflation was a rise in energy prices under the impact of higher oil prices in early 2011 and global food prices at the end of 2010. Inflation in Slovenia was at 2.1% last year and at a similar level as in the preceding three years. Amid the same key drivers of inflation, 2011 inflation in Slovenia was lower than in the euro area chiefly due to the impact of weaker economic activity, according to our estimate. Cost competitiveness improved y-o-y in the first nine months of 2011, but Slovenia remained in the group of euro area countries with relatively greater losses in cost competitiveness during the crisis. Last year's improvement in cost competitiveness was largely related to lower growth in the compensation per employee compared with labour productivity growth. In the first nine months, the drop in real unit labour costs was one of the smallest in the EU, as wage growth lagged more notably behind labour productivity growth than in Slovenia in most other Member States. Because of a more pronounced deterioration in 2008-2010 than, on average, in the euro area and the EU, in 2011, Slovenia remained in the group of countries with relatively the largest deteriorations in cost competitiveness in the time of crisis. In December, net repayments of domestic nonbanking sector loans were highest so far, and the same goes for impairments and provisions. December's net repayments of domestic nonbanking sector loans were the highest to date, totalling EUR 560 m. The bulk came from net repayments of enterprises and NFIs, which, in December alone, accounted for more than 60% of total net repayments in 2011 (almost EUR 1 bn). Most of the year, enterprises were replacing the lack of domestic sources of finance by loans taken out abroad, but these also shrank in the last months of the year. This could also be attributable to Slovenia's credit rating downgrades and a consequent erosion of foreign lender confidence in Slovenian businesses. In the first eleven months of 2011, banks operating in Slovenia net repaid EUR 1.7 bn in loans and deposits to the rest of the world, two fifths more than in the same period of the preceding year. Liquidity pressures on Slovenia's banking system were, to a certain extent, eased by the longer-term refinancing operation of the ECB. The liabilities of Slovenian banks to the Eurosystem thus rose by EUR 900 m in December, but lending activity is not expected to strengthen much, as banks placed the bulk of these funds with the ECB, saving them, in our estimation, to repay around EUR 4 bn of maturing liabilities in 2012. The quality of banks' assets keeps deteriorating, as the volume of bad assets climbed to EUR 5.3 bn in November, exceeding one tenth of all banking sector claims. Banks created more than EUR 300 m in additional provisions and impairments in December alone, and EUR 1.1 bn in 2011 as a whole, which is up 40% from 2010. The total amount of provisions thus rose close to EUR 3.5 bn, according to our estimate. In the first ten months of 2011, the deficit in the consolidated general government revenue and expenditure totalled EUR 1,337 m, just EUR 500 m less than in the same period of the preceding year. Looking at revenues, particularly revenue from corporate income tax was up y-o-y in the first ten months, while revenue from all other main taxes and social security contributions recorded modest growth and non-tax revenues declined. The y-o-y growth of general government expenditure has been slowing since the adoption of measures to contain budgetary expenditure mid-2011 and the revision of the state budget in September. Expenditures on capital and capital transfers, payments into the EU budget, subsidies, as well as, to a small extent, wages, salaries and other personnel expenditures were down y-o-y in the first ten months. On the other hand, expenditures on interest and transfers to individuals and households continued to grow at high rates y-o-y. In 2011, the net budgetary surplus towards the EU budget amounted to EUR 407 m, a quarter more than in 2010. Slovenia received EUR 812 m from the EU budget, close to EUR 100 m more than in the preceding year, and 95% of the level envisaged in the supplementary budget. ■ö £ Q) E o £ O u Q) £ Q) 3 U International environment Amid a steady deterioration of economic conditions in the euro area, in January the IMF also cut its economic growth forecast for 2012. Economic activity in the euro area continued to moderate in the last few months of 2011. Production volume and new orders in manufacturing and turnover in retail trade declined in November and construction activity remained low (seasonally adjusted). Weak economic conditions are also reflected on the labour market, as the unemployment rate in the euro area rose by 0.3 p.p. to 10.3% between June and November. Confidence indicators also show a continuation of unfavourable trends. Like some other international institutions in previous months, the IMF also cut its 2012 forecasts in January, predicting that global GDP would rise 3.3% instead of 4.0% as expected in September. The emerging Asian economies will remain the main engine of growth. In comparison with September's forecast, the IMF slashed its forecast for the euro area in particular, expecting a 0.5% contraction of economic activity this year. The main reason cited for the revision is the escalation of the sovereign debt crisis, as bank deleveraging and additional fiscal consolidation will negatively impact economic movements in the short term. A modest recovery is expected next year, when GDP is set to increase by 0.8%, though unemployment will remain high. However, the IMF warns that in the absence of a more comprehensive and faster response in the euro area, growth may even be lower than currently predicted. In a downside scenario it assumes that the sovereign debt crisis continues to deepen. As a result, economic activity in the euro area will be 4.0% lower than the current forecast, which would also have greater adverse effects on the global economy. Figure 1: IMF downside scenario, January 2012 -World -Euro area a a a Source: IMF. In January, financial market conditions remained tight and the credit ratings of certain euro area countries were downgraded again. The rating agency Standard and Poor's downgraded the credit ratings of nine euro area countries in January,1 citing lack of confidence in December's agreement on the fiscal pact as the main reason. In the agency's view, the agreement does not provide a comprehensive solution to euro area problems, as they are as much a consequence of rising external imbalances and divergences in competitiveness as of fiscal imbalances. By reducing the credit ratings of Austria and France, which had enjoyed the highest, AAA ratings2 before that, S&P also lowered the credit rating of the temporary European Financial Stability Facility (EFSF), which had, until then, depended on triple-A ratings of six Member States. The yields on 10-year government bonds of the euro area countries thus remained high in January. The ECB otherwise continued with the Securities Markets Programme and it purchased EUR 7.6 bn in government bonds (EUR 219 bn, in total, since the beginning of the programme in May 2011). Despite the non-standard measures taken by the ECB to ensure banking sector liquidity, the high overnight deposits at the ECB in January indicate severe concerns on the interbank market. Figure 2: 10-year government bond yield spread vis-avis German bonds i jä 24 22 20 18 16 14 12 10 8 6 4 2 T...... - Slovenia . Greece ■ Ireland - Portugal - Spain Italy ......kf.......V Source: Eurostat; calculations by IMAD. Interbank interest rates in the euro area dropped in January. December's decline in the key ECB interest rate was followed by a fall in the three-month EURIBOR in January, by 21 b.p. to 1.222%, while the three-month US dollar and Swiss franc LIBOR rates remained almost unchanged (0.57% and 0.06% respectively). The euro continued to lose value against the main currencies in January. In January, it dipped to its 17-month low 1 By two levels for Cyprus, Italy, Portugal and Spain, and by one level for Austria, France, Malta, Slovakia and Slovenia. 2 The euro area countries that still have the top AAA-ratings are thus only Germany, Finland, the Netherlands and Luxembourg. 0 relative to the US dollar, by 2.1% to USD 1.291 per euro. It also continued to fall relative to the Japanese yen (by 3.1%, to JPY 99.33 to EUR 1), the British pound sterling (by 1.4%, to GDP 0.832 to EUR 1) and the Swiss franc (by 1.4%, to CHF 1.211 to EUR 1). Oil prices rose in January, oil prices in euros even reached an all-time high, while non-energy commodity prices were stable. The average price of Brent crude oil totalled USD 110.69 a barrel in January, up 2.6% from December and up 14.7% y-o-y. In January, oil prices in euros soared to the highest level ever, by 5.7% to EUR 86.33 per barrel. Prices of non-energy commodities rose in 2011 as a whole (17.8%), but less than in 2010 (26.4%). In December, they were down 12.2% y-o-y, according to IMF figures, primarily in response to the cooling of the global economy and consequently lower demand for commodities. According to provisional data, non-energy commodity prices remained at December 2011 levels in January. Figure 3: Prices of Brent crude oil and the USD/EUR exchange rate -Price in EUR (left axis) -----Price in USD (left axis) - Exchange rate of USD to EUR (right axis) /-I / t \ 4.......4.......i. ^ 1 f 1 1 l\ / »v A _____..i.......i.......i.......j 1 ^ rJrH^ J \' \ I t t 1 K/V" ■.......H'........ \» V V ^a!/^ .....h....... ........i......I.......I.......j.......i- i2 Source: ECB, EIA; calculations by IMAD. Economic developments in Slovenia October's and November's movements of short-term indicators indicate a moderation of economic activity in Slovenia in the last quarter of 2011. In our estimate, real merchandise exports increased slightly in October and November, but remained below the Q3 level in the two months as a whole. Having already dropped mid-2011, real production volume in manufacturing remained unchanged in the autumn months. Construction activity stagnated at very low levels between July and November. Real turnover in retail trade shrank somewhat in November, after subdued growth in the summer months. Within this sector, turnover in automotive fuels continues to grow. Figure 4: Short-term indicators of economic activity in Slovenia -Merchandise exports - Industrial production in manufacturing ■ Value of construction put in place -Turnover in retail trade 55 JŠ Source: SORS; calculations by IMAD. Growth in merchandise trade3 was slowing towards the end of 2011. In our estimate, real merchandise exports^ otherwise rose slightly in November, seasonally adjusted, but recorded slower growth than in Q3, which is mainly attributable to the moderation of economic activity in Slovenia's main trading partners. After declining in the preceding two months, real merchandise imports^ also increased in November, in our estimation, but the average Figure 5: Estimate of real merchandise exports and imports Merchandise exports Merchandise imports Source: SORS; calculations by IMAD. 3 According to the external trade statistics. 4 The estimate of real exports is based on nominal exports according to the external trade statistics and industrial producer prices on the foreign market. 5 The estimate of real imports is based on nominal imports according to the external trade statistics and the index of import prices. 1.6 1.4 80 1.2 60 40 20 level of October's and November's imports nevertheless fell short of the Q3 average. In the first eleven months of 2011, exports were up around 7% and imports around 6% in real terms relative to the same period of the year before. The nominal value of trade in services6 declined in November. After growing in previous months, exports of services shrank by 2.6%% in November, seasonally adjusted. In the first eleven months of 2011, they were up 8.1% y-o-y in nominal terms. Since the second half of 2011, their growth has mainly been underpinned by exports of travel, while in the last three months for which data are available, exports of communication services also increased y-o-y. Imports of services fluctuated around Figure 6: Trade in services -Exports of services 450 -Imports of services the level seen at the beginning of the year (seasonally adjusted). In the first eleven months, they were up 2.0% y-o-y, largely on the back of miscellaneous business, professional and technical services, while imports of construction services were still down y-o-y due to a decline in investment activity. Production volume in manufacturing stagnated in the autumn months after the contraction in the middle of the year. According to seasonally adjusted data, production in medium-high- and high-technology industries, which had stagnated most of 2011, increased slightly in the autumn months. In our estimation, the greatest contributions to growth came from the manufacture of electrical Figure 7: Production volume in manufacturing according to technology intensity ^^ 75 Total Medium-high and high Medium-low Low ^^ J; ^^ J; ^^ .. Source: BS; calculations by IMAD. ?§ Si^ 85 85 Source: SORS; calculations by IMAD. Table 1: Selected monthly indicators of economic activity in Slovenia in % 2010 XI 11/ X 11 XI 11/ XI 10 I-XI 11/ I-XI 10 Exports1 12.2 1.9 9.0 12.1 -goods 13.7 5.0 9.5 13.1 -services 6.6 -11.0 6.4 8.1 Imports1 14.3 4.3 4.0 11.0 -goods 16.1 5.5 5.2 12.6 -services 4.5 -4.1 -5.0 2.0 Industrial production 6.2 1.22 -0.23 3.73 -manufacturing 6.6 0.52 1.03 3.73 Construction -value of construction put in place -16.9 23.12 -10.13 -25.73 Real turnover in retail trade -0.2 -0.12 1.33 1.93 Nominal turnover market services (without distributive trades) 6.5 1.02 3.73 4.83 Sources: BS, Eurostat, SORS; calculations by IMAD. Notes: 1balance of payments statistics, ^seasonally adjusted, 3working-day adjusted data. Figure 8: Business trends in manufacturing - selected indicators - Production Export orders Expected export order books -Total orders - Expected total demand -100 c 6 According to the external trade statistics. 85 JŠ Source: SORS. 95 90 35 70 Box 1: The volume of road and rail freight transport Road and rail freight transport volumes declined in Q3 2011. After growing in the first half of the year, the volume of road freight transport shrank in Q3 (seasonally adjusted). Most of the decline was attributable to a lower volume of freight transported by natural persons (sole proprietors), while one fifth came from a decline in freight transported by legal persons (companies). The trend of a decline in the share of transport by natural persons and an increase in the share of transport by legal persons thus continued last year.1 In Q3 2011, the volume of rail freight transport dropped for the second quarter in a row (seasonally adjusted). Despite the decline in Q3 2011, road and rail freight transport volumes remain around the same level as, on average, in 2008. Figure 9: Freight transport volume 1 In Q3 2011, the ratio between the volumes of transport carried out by companies and sole proprietors totalled 68:32, in contrast to 2001, when it had been nearly balanced (52:48). 3,000 - Road freight transport - legal persons ■ Road freight transport - natural persons - Rail freight transport 2,500 <5 2,000 S= 1,500 " 1,000 a a a Source: SORS; calculations by IMAD. equipment and the manufacture of motor vehicles.7 Production in medium-low technology industries, which had been declining most of the year, expanded slightly in November,8 which we estimate was due to the metal industry. Industries with the lowest degree of technology intensity, where production had been growing in the first six months, recorded somewhat slower growth in the second half of the year. Following a pronounced decline in July, in November, manufacturing production failed to reach the levels recorded in the first half of the year and was similar to that in the same month of 2010. Box 2: Electricity production and consumption balance Electricity production in Slovenia declined in 2011, mainly as a result of lower water levels of rivers, while electricity consumption increased almost entirely on account of stronger aluminium production. Electricity production dropped 5.5%, while electricity consumption rose 3.6%.1 Production in hydroelectric power plants dropped more than one fifth from the high levels in previous two years, while nuclear power plant production rose one tenth and thermal power plant production remained practically unchanged. Because of higher aluminium prices, domestic aluminium production, and hence electricity consumption, strengthened notably and accounted for almost the entire increase in Slovenia's electricity consumption in 2011.2 International electricity trade also picked up significantly in 2011. Taking into account only the Slovenian part of nuclear power plant production, electricity exports were up 17.5% and imports up 30.5%. Slovenia's net electricity imports thus amounted to just over 1700 GWh, i.e. around 13% of total electricity consumption. Roughly one half (approximately 45%) of the increase in imports was due to higher domestic demand for electricity, while the rest was a result of increased electricity trading. The latter was partly attributable to the increase in transmission capacity on the Slovenian-Italian border. At the beginning of 8 the year, trading on this border was also made easier by the Hi introduction of implicit auctions. je 6 Figure 10: Electricity production and consumption ■ Production in nuclear power plants (50%) ■ Production in thermal power plants and qualif. p. ■ Production in hydroelectric power plants ^ Transmission losses and pumped-storage plant Avče ■ Consumption from the distribution network ■ Consumption by direct users 10 1 In production we took into account only the Slovenian share of electricity generated in the nuclear-power plant, while the consumption figure also includes transmission losses. 2 The consumption in the aluminium production plant Kidričevo increased by 487 GWh, other direct consumption (4 steelworks) by 29 GWh and the consumption from the distribution network by 50 GWh, while the consumption by the pumped-storage plant Avče and transmission losses declined by 52 GWh and 67 GWh, respectively. 2007 2008 2009 2010 Source: ELES. 7 This is IMAD's estimate, as at the level of industries only original data are available. 8 In the first half of the year, the production drop in this group was chiefly caused by the rubber industry, in our estimation. Box 3: (In)solvency In December, over one tenth fewer legal entities had outstanding matured liabilities than in the same month of 2010, but the total amount of these liabilities (EUR 602.3 m) was more than half higher. The number of legal entities declined relative to December 2010, most notably in manufacturing and transportation and storage activities. The amount of outstanding matured liabilities increased most notably in information and communication activities, followed by transportation and storage and administrative and support service activities. In December 2011, the highest number of legal entities with outstanding liabilities (over one fifth) with the highest total amount of outstanding liabilities (one quarter) was again recorded in the construction sector (as in December 2010). Among sole proprietors and other registered natural persons, in December, fewer natural persons had outstanding matured liabilities than in the previous December, but the total amount of these liabilities was higher. The number of natural persons was almost a fifth lower than in December 2010, but the total amount (EUR 106.1 m) was 5.7% higher. In December, the highest number of these natural persons (a quarter) with the highest amount of outstanding liabilities (close to a third) was again recorded in the construction sector, followed by natural persons in wholesale and retail trade, maintenance and repair of motor vehicles, and accommodation and food service activities. Figure 11: Legal entities with outstanding matured liabilities for more than five consecutive days in a month and average total amount of outstanding liabilities No. of legal entities with outstanding matured liabilities (left axis) -Average daily amount of outstanding matured liabilities, EUR m (right axis) 7,00^ I—^—^—^—^—^—^—^—^^—:—^^—:—^ 700 Figure 12: Filing of bankruptcy procedures Bankruptcies against legal entities (left axis) —■— Personal bankruptcies against sole proprietors (right axis) 180 ' 6,000 5,000 4,000 3,000 2,000 1,000 0 lit m 400 E 90 30 100 60 301= a Source: AJPES. a a a Source: AJPES -eObjave v postopkih zaradi insolventnosti (e-Release in insolvency procedures). Table 2: Legal entities with outstanding matured liabilities for more than five consecutive days in a month, December 2011 Activity No. of legal entities with outst. mat. liab. XII 11/ XII 10, in % I-XII 11/ I-XII 10, in % Average daily amount of outst. mat. liab., in EUR XII 11/ XII 10, in % I-XII 11/ I-XII 10, in % Average daily amount of outst. mat. liab. per legal entity, in EUR Construction 1.159 -12,1 14,1 150.372.720 32,1 60,1 129.744 Wholesale and retail trade, repair of motor vehicles and motorcycles 1.146 -13,8 19,2 86.808.849 58,8 49,0 75.749 Professional, scientific and technical activities 596 -11,2 23,2 76.083.589 80,3 155,0 127.657 Manufacturing 635 -19,1 12,2 72.281.590 77,9 12,9 113.829 Transportation and storage 307 -18,6 10,5 64.977.244 194,8 127,4 211.652 Information and communication 168 -10,6 21,4 28.799.739 379,0 129,1 171.427 Real estate activities 171 1,8 34,8 27.933.234 59,5 111,8 163.352 Administrative and support service activities 156 -9,3 28,3 23.244.648 114,8 208,0 149.004 Other service activities 1.092 0,0 26,0 71.760.578 -9,5 5,8 65.715 Total 5.430 -11,0 18,9 602.262.191 55,6 56,5 110.914 Source: AJPES. 50 600 40 500 300 60 20 200 10 0 0 0 Insolvency of business entities increased in 2011 as a whole relative to the year before. In 2011, almost a fifth more legal entities and sole proprietors and other registered natural persons than in 2010 had outstanding matured liabilities for more than five consecutive days in a month, on average (hereafter outstanding liabilities).1 The total average daily amount of their outstanding liabilities increased even more than their number, by more than half in legal entities and nearly two fifths in sole proprietors and other registered natural persons. One of the measures to improve payment discipline was the mandatory multilateral set-off introduced last year.2 In the nine set-off procedures, the mutual indebtedness between business entities decreased by EUR 605.9 m, which accounts for 6.7% of all notified obligations. In 2011,22.9% more compulsory settlement procedures and 31.2% more bankruptcy procedures were filed against legal entities than in the preceding year, and 29.0% more personal bankruptcy procedures against sole proprietors. Against legal entities 43 compulsory settlement procedures, 588 bankruptcy procedures and 6 liquidation procedures were initiated in 2011. The most of the compulsory settlement and bankruptcy procedures were filed in construction, manufacturing and retail and wholesale trade, maintenance and repairs of motor vehicles. A total of 89 personal bankruptcy proceedings were filed against sole proprietors, the most in construction, followed by transportation and storage, manufacturing, wholesale and retail trade, maintenance and repair of motor vehicles, and accommodation and food service activities. 1 The AJPES records refer only to outstanding liabilities according to writs of execution and tax debt. They do not include other outstanding liabilities arising from unpaid bills. 2 The mandatory multilateral set-offs have been conducted since April 2011 based on the Act on Prevention of Late Payments, OG of RS, No. 18/2011. After increased pessimism in the autumn months, the prospects for the manufacturing sector for the first months of this year remain bleak. In January the share of enterprises expecting higher exports and total demand in the next three months remained similar to that at the end of 2011, which is the lowest level since 2009. The values of other indicators of expectations did not improve either. The share of enterprises facing insufficient domestic and foreign demand continues to rise, despite the increase in the values of indicators of export and total orders. The decline in total demand is also indicated by the current data on revenues from sales. At the end of the first eleven months of the year, revenues from sales on the domestic market (which had still been rising in Q1 2011) were at a similar level as in the same period of 2010, while revenues from sales on the foreign market, which have been falling since mid-2011, were still 4.8% higher. Amid lower demand, capacity utilisation also declined at the end of last year (to 78.9%), and expectations of enterprises regarding production in the next three months also remained grim in January. Construction activity remains low. Amid strong monthly fluctuations, the value of construction put in place increased in November (23.1%, seasonally adjusted), after October's decline (-13.3%, seasonally adjusted). In November, it was thus 10.1% lower than in the same month of the year before. Residential construction activity shrank further, with the value of construction works down 30.9% y-o-y. On the other hand, activity in civil engineering was up strongly at the monthly level (35.8%) and was also higher y-o-y (1.2%). The prospects for the construction sector remain uncertain. Among considerable monthly fluctuations, the value of new contracts in large construction companies dropped 24.8% in November. In the first eleven months of 2011, it was down 32.4% y-o-y. Data on business trends are more favourable, as in December the confidence indicator in construction recorded the highest value since the Figures 13: Value of construction put in place -Construction - total -Residential buildings -----Non-residential buildings -----Civil engineering works 120 Source: SORS; calculations by IMAD. beginning of the crisis, albeit much lower than in the pre-crisis period. Similar movements are also shown by the indicator of expected orders, as in December more enterprises expected an increase in orders than a decline. Turnover decreased in all three trade sectors in November. After the fluctuations in previous months, it remained close to the level recorded at the beginning of 2011. Real turnover in the sale and repair of motor vehicles, which had been growing in 2010, stagnated last year (seasonally adjusted). In retail trade, turnover declined somewhat in November, after slight growth in the summer months. Turnover in automotive fuels continues to grow, in our estimation as a result of lower prices of certain automotive fuels than in the neighbouring countries at the end of last year. In other segments of retail trade the negative movements persist, owing to continued tensions on the labour 80 60 40 20 Figure 14: Turnover in trade sectors -Retail trade, real -----Automotive fuels, real -----Sale, repair of motor vehicles, real holesale trade, nom. -A Source: SORS; calculations by IMAD. market. Turnover in the sale of food and in the sale of nonfood products has been falling since spring 2011, after it stagnated in 2010. Data on nominal turnover in wholesale trade indicate a moderation of activity, following the increase in the first months of 2011. After very weak growth since the beginning of the year, the situation in market services (excluding distributive trades)9 deteriorated in the last months of 2011. The deterioration resulted from a decline in nominal turnover in transportation and storage and communication services. Within transportation and storage activities, turnover Figure 15: Nominal turnover in market services (excluding distributive trades) - Total -Transportation and storage (H) -----Communication activ. (J) -----Professional, technical activ. (M) 75 Source: Eurostat; calculations by IMAD. in land transport has decreased markedly since August, while turnover in warehousing and support activities for transportation has still been growing slightly. It was only turnover in transportation and storage activities that exceeded the2008 level,despite a decline. After decreasing since the summer months, turnover in information and communication services was around 7% below the 2008 average in November, while turnover in accommodation and food service activities and professional and technical activities has been stagnant in recent months. Household consumption remained modest at the end of 2011 and consumer confidence worsened considerably in January this year. In December, the net wage bill declined (-0.3%, seasonally adjusted), as did real turnover in retail trade excluding automotive fuels10 (-2.1%, seasonally adjusted.). In 2011 as a whole, the number of new passenger car registrations by natural persons was more than one tenth lower than in 2010. Households net repaid EUR 30 m in consumer loans in December (in 2011 as a whole, more than EUR 100 m). After having improved in December, the consumer confidence indicator deteriorated again in January. The values of all four confidence indicators declined, most notably the estimates of the financial situation of the household and the general economic situation in the next twelve months. Figure 16: Household consumption indicators 80 70 60 Turnover in retail trade excluding automotive fuels (left axis) No. of first car registrations by natural persons (left axis) Net wage bill (left axis) Consumer confdence indicator, seasonally adjusted (right axis) 10 Mt ...i.......i.......i......i .. 1.....i.......f.......f......4.......4.......4.......4.......4.......f..... -20 -30