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Available data for the third quarter point to a deterioration in economic activity in the euro area. GDP growth in the euro area was still relatively favourable in the second quarter compared to the first, amounting to 0.8%, as demand for contact-intensive services increased with the easing of COVID-19-related restrictions. However, available confidence indicators (PMI, ESI) suggest that economic activity deteriorated in the third quarter. Against the backdrop of high energy prices, limited gas supply, lower gas consumption and supply chain disruptions, of all activities, manufacturing remains the largest contributor to the decline in confidence. Demand for services has also declined and consumer confidence reached its lowest level ever. Economic forecasts are falling amid strong inflationary pressures and monetary tightening. According to the OECD’s September forecast and the IMF’s October forecast, economic growth in the euro area is expected to slow from 3.1% this year to 0.3% (OECD) or 0.5% (IMF) in 2023. The most important short-term risk to the forecasts is a possible gas shortage in Europe, which could further increase inflation and dampen growth.

In the summer months, household consumption in Slovenia was similar to the second quarter, but was held back by price pressures, greater rationality and consumer caution. Turnover in market services declined, while activity in the export part of the economy and manufacturing output increased; expectations are accompanied by great uncertainty. In July and August, household consumption was similar to the second quarter. Partly due to high base, it was lower than last summer in most segments. Real turnover in market services declined in July after five months of growth. In most trade sectors, real turnover, which had stagnated in the second quarter, remained unchanged in July and, according to preliminary data, also in August. The growth of trade in services, which had been accelerating for several months, was interrupted in July. According to data on the value of construction work put in place, construction activity in July was higher than last year. Compared to previous years, the construction of buildings stands out in terms of activity, while activity in civil engineering was also high. Cost pressures in construction, as in other activities, continue and are an important source of uncertainty about future developments. Manufacturing output continued to rise in August, but the outlook for the end of the year deteriorated further in September. Manufacturing output continued to rise in August, but the outlook for the end of the year deteriorated further in September. The manufacture of motor vehicles remains below the previous year’s level, affected by supply chain disruptions and restructuring towards a greater supply of greener vehicles, as does production in less technology-intensive but mostly more energy-intensive industries. Electricity consumption in August and September was again lower than in the same period last year, which we associate with higher electricity prices and the resulting adjustments, especially in energy-intensive companies. Compared to the previous five-year period, gas consumption has fallen by more than a tenth since the beginning of the year, which we associate with rising gas prices related to the energy crisis and lower gas consumption, especially in industry. In August, it was 14% below the comparable average consumption in the five preceding years; the decline in September was smaller (11 %), but will be larger again in October according to available data. Trade in goods with EU Member States increased in July and August. Uncertainty in the international environment (the war in Ukraine, inflationary pressures, supply chain disruptions) is high and is having a negative impact on sentiment in export-oriented activities. The value of the economic sentiment indicator fell significantly in September and was below the long-term average. Confidence was significantly lower than a year ago among consumers (falling household purchasing power due to rising prices), in construction (rising prices of building materials and capital goods, rising interest rates), and in manufacturing (supply chain bottlenecks, high prices of raw materials and energy). 

The number of unemployed continues to fall and employment continues to rise, albeit at a somewhat slower pace, and inflation is affecting the real decline in wages. The number of persons in employment peaked in July but year-on-year growth has gradually slowed since the beginning of the year, except in construction and, to a lesser extent, in accommodation and food service activities, which also face the severest labour shortage. Employment of foreigners is increasingly contributing to overall growth. At the end of September, 52,043 people were registered as unemployed, a fifth less than in the same period of 2021. The number of long-term unemployed also continued to decline and was almost a third lower than a year ago. In the face of high inflation, the average gross wage fell year-on-year again in real terms in July. The decline was more pronounced in the public sector due to last year’s high base, which was related to the payment of COVID-19 bonuses. 

Year-on-year consumer price growth moderated slightly in September (from 11% to 10%) and real estate prices continue to rise. The slowdown in consumer price inflation is largely due to the government’s measures to mitigate energy costs, which are expected to lower inflation by 2.3 p.p., according to IMAD’s estimates. In September, the price of electricity fell by almost a quarter month-on-month, while it was slightly more than half a percent higher year-on-year. Food price growth continues to gradually increase, with food prices up 14.4% year-on-year. The year-on-year increase in Slovenian industrial producer prices slowed only slightly in August and remained relatively high. Prices of dwellings, especially existing ones, continued to rise in the second quarter, while the number of transactions declined. 

The general government deficit in the first eight months was significantly lower than in the same period last year, amounting to EUR 383 million (1.2 billion in the same period last year). Due to better corporate performance, the revenue growth came mainly from corporate income tax and, with the strengthening of household consumption and inflation, from VAT. Due to the reduction in excise duties on energy and electricity to mitigate the impact of rising prices, the growth in these revenues was modest. Revenue from EU funds increased significantly. Expenditure was slightly lower than a year ago, reflecting lower payments related to measures to mitigate the consequences of the epidemic. On the expenditure side, investments, payments to the EU budget, and expenditure on goods and services all increased year-on-year.