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Thursday, July 31, 2008

Estonian Retail Sales and Industrial Output Continue Their Decline In June

Estonian annual retail sales and industrial production declined in June, adding evidence to the hypothesis that the economy is now firmly in the grip of its third - and possibly most important - recession since becoming independent in 1991.

Retail sales fell an annual 7 percent, the biggest drop since at least 2001, and the fourth consecutive month in which sales have contracted on an annual basis, the national statistics office said today.

In June, seasonally adjusted industrial output in Estonia increased 2% compared to May. In comparison with June of the previous year, however, industrial output was down by 5%. The decrease in output was basically the result of a continuous decrease in electricity production — compared to June of the previous year, the production of electricity decreased 28%. As before, the decrease in electricity production was caused by a partial replacement of own production with electricity imports — in June nearly one third of consumed electricity was imported.

Manufacturing output was down 2%. The main reason for this was the decrease in orders. According to the information of Estonian Institute of Economic Research, more than half of enterprises mentioned insufficient demand as the key factor hindering the growth. The growth in production is mainly hampered by the decrease in internal market demand.

In June compared to the same period of the previous year, the industrial domestic sales decreased 5%, however, industrial export sales increased 3%. The decrease in the production of manufacturing was mainly influenced by the production of food, wood and building materials. The decrease in the manufacturing of food is continually affected by price increase and by the decrease in consumption resulting from it. In June, the producer prices of food products rose more than 18% compared to June of the previous year, in the manufacturing of milk products the increase was 28%. Nevertheless, the producer prices of milk products fell compared to May. Due to the decrease in construction volumes, the production of building materials is continually in a declining trend — the production of building materials decreased 24% compared to the previous year. The downward trend continued in the manufacturing of wood, and in the production of furniture.

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