In the summer months, household consumption in Slovenia was similar to the second quarter, increasingly held back by price pressures, greater rationality and prudent spending; activity in market services also decreased over the summer; activity in the export part of the economy and manufacturing output increased; expectations are accompanied by great uncertainty. In July and August, household consumption remained similar to the second quarter, when it had declined compared to the first. In most segments for which data are available, it was slightly lower than in the summer months of last year, partly due to the high base. 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 remained significantly higher than last year. Manufacturing production and trade in goods with EU Member States increased in July and August. However, uncertainty in the international environment (the war in Ukraine, inflationary pressures, supply chain disruptions) remains high and is having a negative impact on sentiment in export-oriented activities. 

In September, electricity consumption fell by 7% year-on-year, a similar decline to that in August. In our estimation, the lower consumption than last year is mainly due to the industrial electricity consumption as a result of high electricity prices, due to which some companies, especially in energy-intensive industries, have reduced their production or adapted their production processes to achieve higher energy efficiency. Compared to last September, consumption was also lower in our main trading partners (-6% in Austria, -5% in France, -3% in Italy, and -1% in Croatia and Germany).

In September, electricity consumption in the distribution network was 4.4% lower year-on-year. The main reason for this was lower industrial consumption (-5.1%), which, according to our estimates, is mainly the consequence of lower consumption by some energy-intensive companies, which reduced their production volume due to high electricity prices but probably also improved their energy efficiency. Household consumption was also lower in September than a year ago (by 3.9%), while small business consumption remained about the same.

Natural gas consumption in August and September was lower than the comparable average consumption in the previous five years (by 14% and 11% respectively); according to available data consumption will be even lower in October. 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 consumption, especially in industry. Gas consumption usually increases significantly in October with the start of the heating season, and despite the government’s measure to limit the increase in gas prices, households are expected to use gas more rationally during the energy crisis. According to the Council Regulation, all Member States should reduce their gas consumption in the period from 1 August 2022 to 31 March 2023 by at least 15% compared to their average gas consumption in the same period during the five preceding years. In Slovenia, consumption fell by 14.8% from the beginning of August this year to 18 October 2022, according to preliminary data. 

Amid high price growth, the value of fiscally verified invoices in September was higher year-on-year and compared to the same period of 2019 (by 12% and by 19% respectively). Year-on-year growth, which was similar on average to the previous two months, fell in the first half of the month and rose in the second. The latter was mainly the result of a lower base last year due to the expansion of the recovered/vaccinated/tested rule to users of most services in mid-September last year. The year-on-year growth in the month as a whole was mostly due to 13% nominal growth of turnover in trade, which accounts for about three-quarters of the total value of fiscally verified invoices. Turnover in accommodation and food services was also 7% higher in nominal terms, with the value of fiscally verified invoices in accommodation establishments lower than last year for the first time this year, given last year’s high base (the number of overnight stays by tourists last September was more than a tenth higher than in September 2019).

Trade in goods increased in July and August; uncertainty remains high. Real exports and imports of goods to and from EU Member States rose by more than 6.5% in July and August (seasonally adjusted) and were significantly higher than a year ago. Compared to the same period in 2019 (i.e. before the epidemic), exports to EU Member States rose by 10.7% in real terms and imports by 0.4%. Trade with non-EU countries also increased compared to the same period last year, but this fluctuates from month to month due to operations involving processing. In recent months, trade in goods with Russia and Ukraine, which was interrupted at the start of the war, has increased again. The high level of uncertainty in the international environment (inflation, supply chain disruptions, energy supply problems, continuation of the war in Ukraine) also had a noticeable impact on the sentiment in export-oriented activities, as export orders and expectations declined further in September. 

Slovenia’s export market share in the EU market continued to decline in the second quarter of 2022. Based on SURS data, the nominal euro value of Slovenian merchandise exports to the EU market increased by 27.5% compared to the second quarter of 2021, and EU merchandise imports recorded an even higher year-on-year increase. According to first estimates, Slovenia’s market share in the EU market fell by 5% year-on-year in the second quarter and by 5.9% in the first half of the year. In both the second quarter and the first half of this year, market share was lower year-on-year in three key manufacturing industry groups (vehicles, electrical machinery, apparatus and appliances and pharmaceutical products). It was higher for metal products and industrial machinery. For energy-intensive products, it remained on average at a comparable level to the first half of last year; for metals (iron, steel, aluminium) and paper, it increased, while for chemical and non-metallic mineral products, it fell. Slovenia’s export market share in the EU goods market has been declining since the third quarter of last year and is already 6.1% below the pre-epidemic level (first half of 2019), especially due to this year’s decline. 

The growth of trade in services, which had been accelerating for several months, was interrupted at the beginning of the third quarter. Compared to the previous month, both imports and exports of services decreased in July. Among the main groups, trade in ICT services in particular declined. The favourable monthly development of trade in tourism-related services continued, although it remained below pre-epidemic levels. Trade in transport services also increased, but its growth has slowed noticeably in recent months. Due to last year’s low base, the year-on-year growth in trade in services was still very high in the first seven months (32.7%) and also exceeded the pre-epidemic level (January–July 2019) by a fifth.

Manufacturing output increased in August. It continued to rise in high-technology industries and was also much higher in medium-high-technology industries. Manufacturing output in less technology intensive industries has mostly slowed since the middle of the year. In the first eight months of the year, manufacturing output was on average 6.2% higher year-on-year. It remained lower in the manufacture of motor vehicles (supply chain disruptions, "green" structural change) and in some less technology intensive industries (repair and installation of machinery and equipment, leather industry), including more energy-intensive industries (paper and rubber). 
The outlook until the end of the year deteriorated further in September. Export expectations worsened, with most of the companies surveyed expecting a decline in production until the end of the year.
 

According to figures on the value of construction work put in place, construction activity in July was considerably higher than last year. After a strong upturn in construction activity at the beginning of this year, the value of construction work remained at a high level during the rest of the year and was 28.5% higher in July than in the same month of 2021. Compared to previous years, construction of buildings stands out in terms of activity. Activity was also high in civil engineering, while it was lower in specialised construction work (installation works, building completion). The implicit deflator for the value of construction work put in place (which measures prices in construction) was above 20% in July. This is slightly lower than a few months earlier, but still close to the highest levels in 20 years.
Some other data suggest significantly lower construction activity. According to the data on VAT, the activity of construction companies in July was 1.5% lower than in July last year. Based on data on the value of construction put in place, the difference in the growth of activity was 30 p.p. According to the national accounts figures for the second quarter of this year (latest available data), the growth in value added was 7.7% year-on-year, which is 17 p.p. less than according to the data on the value of construction work put in place. 
 

Turnover in most trade sectors, which stagnated in the second quarter, remained unchanged in July and, according to preliminary data, also in August. Only the sales of motor vehicles recorded a slightly stronger increase in July and, according to preliminary data, also in August. Despite this increase, this was the only major trade segment to fall far short of pre-epidemic turnover due to low sales at the end of last year and the beginning of this; turnover was also lower than last year. In July, turnover in retail sales of food, beverages and tobacco products also remained lower year-on-year. In other sectors, year-on-year turnover growth continued to weaken in July. According to the preliminary data, turnover in most segments for which data are available remained at a similar level in August as in the second quarter.

After five months of growth, real turnover in market services fell by 3.5% in July, while it was 4.3% higher year-on-year. The sharpest decline in current terms was in information and communication activities, which had seen accelerated growth in the previous month. We assume that the deterioration was due to developments in the domestic market, as turnover from computer services exports continued to rise. Turnover continued to decline in transportation and storage, especially in land transport and postal activities. It also declined in other business activities, especially in services that are often outsourced. As the number of overnight stays by tourists continued to increase, turnover in accommodation and food service activities remained at a high level, as it did in professional and technical activities.

The volume of road freight transport decreased significantly in the second quarter of 2022, while the volume of rail transport stagnated. The volume of road transport performed by Slovenian vehicles decreased significantly quarter-on-quarter and was only 2% higher than in the same quarter of 2019 (cross-trade was 10% lower and other road transport was 13% higher). The sharp quarter-on-quarter decline in the second quarter was largely related to the decline in the volume of transport performed at least partially on Slovenian territory (exports, imports and national transport combined). Nevertheless, the share of cross-trade transport performed by Slovenian vehicles in total transport remains much lower than in the same period before the epidemic (it decreased from 50% to 44%), while the share of foreign vehicle traffic on Slovenian motorways (according to DARS data) has not changed noticeably. Rail freight transport, already declining before the epidemic, was 2% lower than in the same quarter of 2019. 

In the summer, household consumption in most segments was somewhat lower than in the summer months of last year. In July and August, household consumption remained similar to the second quarter, when it had declined (compared to the first quarter). Partly due to last year’s high base, it was slightly lower than last summer in most segments for which data are available. With the deadline for voucher redemption having passed, the total number of overnight stays by domestic tourists in July and August fell by almost half compared to the same period last year, affecting expenditure on accommodation and food and beverage service activities in particular. Expenditure on tourism services abroad was also slightly lower than last year, as was expenditure on food, beverages and tobacco products and on durable goods (passenger cars, furniture and household appliances). Expenditure on some non-food products is still higher year-on-year, especially on pharmaceuticals, medical and cosmetic products, and computer and telecommunication equipment.

The value of the economic sentiment indicator fell significantly in September and remained lower year-on-year. After a sharp decline in July and a temporary increase in August, the value of the sentiment indicator decreased by 4.5 p.p. in September and remained below the long-term average. On a month-on-month basis, sentiment deteriorated in all segments, the most in manufacturing, retail trade and services and slightly less in construction and among consumers. Confidence was higher than a year ago in retail trade, while it fell significantly among consumers, in manufacturing and construction, and slightly in services. Lower consumer confidence is related to the weakening of household purchasing power due to rising prices, while lower confidence in construction is related to rising prices for construction materials and capital goods and increases in interest rates and that in manufacturing to the current conditions in the international environment (supply chain bottlenecks and high raw material and energy prices).

Amid a slightly lower number of transactions, the growth in prices of dwellings was still high in Q2 2022. After an increase of 11.5% in 2021 as a whole, prices rose by 15.6% year-on-year. The high growth was mainly due to higher prices of existing dwellings (by 16.3%), the number of transactions in which was significantly lower year-on-year (by 15.9%) after peaking in Q2 last year. Prices of newly built dwellings were also higher (by 8.4%), but these dwellings accounted for only 2% of all transactions due to insufficient supply. The total value of housing transactions for all types of dwellings sold in the second quarter was EUR 449 million, about a tenth less than in the same quarter last year. 

Households have been facing increasing financial distress since the middle of this year. From May until September, the proportion of households facing financial distress increased by 1.7 p.p., mainly due to the rise in prices and the resulting erosion of household purchasing power. The increase was mainly influenced by the rise in the share of households from the lowest-income quartile facing financial distress (by 6.5 p.p.). Households continued to cover their financial needs to a greater extent by drawing on savings, and the proportion of households running into debt also increased.

The number of persons in employment reached a record high in July; growth was 2.4% year-on-year and has gradually slowed since the beginning of the year. Growth remained high in construction and, to a lesser extent, in accommodation and food service activities, which are also activities facing the greatest shortage of labour. Employment of foreign workers has recently been contributing more and more to overall employment growth, already 71% in July. Consequently, the share of foreign nationals among all persons in employment is also increasing, up 1.4 p.p. to 13.6% over the last year. Activities with the largest share of foreign workers are construction (47%), transportation and storage (32%), and administrative and support service activities (25%).

According to seasonally adjusted data, the decline in the number of registered unemployed in September was similar to the previous two months (-1.2%). According to original data, 52,043 people were unemployed at the end of September, which is a record low and 3.5% fewer than at the end of August and 21.3% fewer than a year earlier. Under conditions of high demand for labour, which is also reflected in the high vacancy rate, the number of long-term unemployed has also been declining since May last year – their number was almost a third lower year-on-year in September. The number of unemployed people over 50, who, like the long-term unemployed, are harder-to-place, is also declining – in September, their number was a good fifth lower than a year ago. 

Due to high inflation, the average gross wage fell by 7.1% year-on-year in real terms in July, more in the public sector (11.1%) than in the private sector (4.4%). In the private sector, the year-on-year decline was slightly larger in real terms than in the previous months. In the public sector, the average gross wage has been lower year-on-year since November 2021, which is related to the payment of bonuses during the declared epidemic (which were still being paid in July last year). We expect this decline to slow further in the coming months and to come to a halt towards the end of the year, when an agreement on a public sector wage increase is expected. 

The number of financial social assistance (FSA) beneficiaries has continued to fall in recent months, while the number of unemployment benefit (UB) recipients has increased slightly. The number of FSA beneficiaries has been declining since mid-2021 and reached its lowest level in August 2022 (78,777 people according to original data). This was mainly due to the improved situation on the labour market and the fact that fewer UB recipients became FSA beneficiaries. The number of UB recipients in August was 10.9% lower year-on-year, but increased slightly in the last three months (to 14,758 people according to original data).

Year-on-year consumer price growth moderated to 10% in September. This was to a large extent the result of the government’s measures to mitigate the impact of the price increase by reducing taxes and regulating the prices of certain energy sources. 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. Despite the lower VAT, the rapid increase in solid fuel prices continued. They rose by almost 15% month-on-month and by over 90% year-on-year. Food prices continued to rise gradually, by 14.4% year-on-year. Amid a higher month-on-month price increase in the clothing and footwear group in September, the year-on-year price increase for semi-durable goods also increased, reaching 5.1%. Year-on-year growth in the prices of durable goods and services stabilised roughly at the levels reached (10% and 5% respectively).

The year-on-year growth in Slovenian industrial producer prices slowed slightly again in August. Compared to the two previous months, however, the slowdown in growth was much less pronounced (by 0.1 p.p. to 21.1%). The growth of prices in foreign markets continues to slow (16.7%), but the growth of prices in the domestic market has increased and was again above 25%. Significantly higher energy prices, which more than doubled year-on-year, were the main contributor to the stronger growth in the domestic market, and monthly growth exceeded 10% in August. The rise in consumer goods prices also increased slightly, but the increase was less pronounced than in the first half of the year. Given the slowdown in economic activity, the growth of Slovenian industrial producer prices in the groups of raw materials and capital goods is also gradually weakening both in the domestic and foreign markets.

The year-on-year growth in the volume of bank loans to domestic non-banking sectors further increased, to 12.1%, in August. In anticipation of a stronger rise in interest rates in connection with an accelerated normalisation of the ECB’s monetary policy, borrowers are still able to obtain loans on relatively favourable terms. Growth in loans to enterprises and NFIs is strengthening and was 18.2% year-on-year, and growth has almost tripled compared to the end of the previous year. The year-on-year increase in household loans has stabilised at around 8% over recent months. Housing loans grew at the same rate as in the previous month (11.9%) and the decline in the volume of consumer loans is gradually slowing. After slowing in the first half of the year, the year-on-year growth in non-banking sector deposits picked up again slightly, but at 6.6% was still below the previous year’s level. Especially growth in deposits by non-financial corporations is increasing, while household deposit growth has stabilised at slightly above 5%. The quality of banks’ assets remains good and the share of non-performing loans remained similar in July (1.1%) to the end of last year.

Yields to maturity of euro area government bonds continued to rise in the third quarter. This was driven by a significant increase in inflation in the euro area, the rise in key interest rates and the increased risks of a slowdown in economic activity and by measures to mitigate the effects of the energy crisis, which have a negative impact on public finances. The yield to maturity of the Slovenian bond was thus 2.45% in the third quarter. The spread to the German bond was 109 basis points, which is 7 basis points higher than in the previous quarter and the largest in five years.

The current account surplus in the last 12 months was significantly lower year-on-year (EUR 243.3 million compared to EUR 3.1 billion), and a deficit of EUR 283 million was recorded in the first seven months. With imports growing faster than exports, the lower surplus was mainly due to goods trade balance, which turned from a surplus to a deficit at the end of last year. Net outflows of primary and secondary income were also higher year-on-year. The primary income deficit was higher mainly because more customs duties were paid to the EU budget this year due to the import of electric vehicles for the entire EU market (via the Port of Koper). In addition, subsidies received from the EU budget were lower. The higher secondary income deficit was due to higher private sector transfers abroad and higher pension payments to pensioners abroad. The services surplus is increasing in all segments of trade in services, especially in travel (lifting of COVID-19 restrictions).

The deficit of the consolidated balance of public finances was noticeably lower in the first eight months of 2022 than in the same period of 2021. It totalled EUR 383 million in the first eight months of 2022, compared with EUR 2.1 billion in the same period last year. Revenue increased by 12% year-on-year in the first eight months of the year. Due to better corporate performance, the growth came mainly from corporate income tax and, with the strengthening of private consumption and inflation, from VAT. Due to the reduction in excise duties on energy and electricity to mitigate the impact of rising energy prices, the growth in these revenues is modest, as is the growth in non-tax revenues, as there will be no one-off revenues from fees for the use of radio frequencies this year. Revenues from the EU budget increased significantly due to the inflow of funds from the Recovery and Resilience Facility and from structural funds under the 2014–2021 multiannual financial framework (MFF). Expenditure decreased by 0.2% year-on-year in the first eight months, reflecting lower payments related to measures to mitigate the consequences of the epidemic. These amounted to EUR 635 million compared to EUR 2,281 million in the first eight months of 2021. This led in particular to a reduction in expenditure on civil servants’ wages, transfers to individuals and households, and subsidies. On the expenditure side, investments, payments to the EU budget, and expenditure on goods and services have increased year-on-year. 

Slovenia’s net budgetary position against the EU budget was positive in the first eight months of 2022 (at EUR 128.3 million). In this period, Slovenia received EUR 607.9 million from the EU budget (36.6% of receipts envisaged in the state budget for 2022) and paid EUR 479.6 million into it (85.0% of planned payments). The bulk of receipts were resources from structural funds (38.7% of all reimbursements to the state budget) and resources for the implementation of the Common Agricultural and Fisheries Policy (30.1%). The share of resources from the EU Cohesion Fund was significantly smaller (9.8%). The second instalment of the advance payment for the implementation of RRP was paid into the state budget from the Recovery and Resilience Facility. According to SVRK data, by the end of 2021 Slovenia had drawn down (payments to beneficiaries) 68% of the available funds from the 2014–2020 financial perspective (including the React-EU programme), and funding decisions taken accounted for 110% of the initially approved funds.