Infographic: Growth returns to industry in January

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Data source: NSI

Comment

After the record decline in the last few years in December, the industrial sector returned to growth in the first month of 2019, both in terms of production and sales. In last month's commentary, we mentioned that the decline is most likely related to the decline in industrial activity in Germany, as it is Bulgaria's main trading partner, especially in terms of industrial goods. Data on the state of German industry in January have not yet been published, but it is very likely that the recovery of growth in our industry is related to similar developments there, especially considering the significant improvement in industrial turnover on the international market.

Higher sales growth on the domestic market is also an important positive development. In case of future weakness on the external market (due to problems in key export markets such as Germany) if domestic demand is strong enough, it can offset the negative effect of such developments. The state of the industrial sector in another major trading partner of Bulgaria - Italy - improved in January and this has probably contributed to the recovery of the sector in our country. Even with this recovery in January, the situation still remains uncertain.

It is questionable whether this recovery will be sustained and continued or whether the weakness in the sector will deepen further. Given the trends across Europe in recent months and expectations for the rest of the year, it is not reasonable to expect growth in the industrial sector to rise to levels higher than those recorded in January. On the contrary, it is much more likely to weaken in the near future.

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