State of the economy: further improvement

According to the Business Cycle Tracer, the improvement in the economy has continued in November. Nearly all indicators in the Tracer have improved from October to November. By far most of them are moving upwards, although they are still concentrated in the recovery stage of the cycle. Vacancies and jobs showed the largest improvement, but manufacturing production and household consumption also increased substantially.

The gross domestic product (GDP) was 0.9 percent higher in the third quarter than one year previously. In the first quarter economic growth was minus 0.5 percent, in the second quarter it was 1.3 percent. The export volume of goods and services was 4.7 percent higher. This increase was slightly smaller than in the first half of the year. Fixed capital formation was 3.4 percent higher. Housing construction picked up and spending on computers was extremely high. Households spent 1.0 percent more in the third quarter than one year previously. This is the largest growth since the third quarter of 2002.

The confidence indicators usually lead the other indicators in economic developments. In November producer confidence was indeed leading, but consumer confidence was not. Producer confidence in manufacturing industry declined slightly in November, but remains high. Entrepreneurs in the business services sector expect more orders and higher turnover in the fourth quarter.

Selling prices and prices of intermediate consumption in the manufacturing industry rose in October from September, the fifth increase in a row. Inflation decreased in October to 1.6 percent. The capital market interest rate of the latest 10-year central government loan was 0.2 percent point higher in October than in September and is back at the level of July and August 2005.

Unemployment, adjusted for seasonal effects, remained almost unchanged in the period August-October compared to the preceding months. In the third quarter of 2005 the number of jobs did not decrease any further. The number of vacancies rose strongly in the same period. In the second quarter there was also a further increase of the hours worked in temp jobs.

Gross domestic product