Latvian Business Confidence Soars in Manufacturing

Construction Sector Shows Resilience Despite Slight Dip

Latvia’s business landscape in July 2025 presents a mixed but generally improving picture, with the manufacturing sector experiencing its most optimistic period in three years, according to the Central Statistical Bureau (CSB). The services sector saw a minor downturn, while retail trade reported gains.

Manufacturing Leads the Optimism Charge

The manufacturing industry’s confidence indicator reached its highest point in three years in July, registering -3.3 on a seasonally adjusted basis. This represents a 0.4 percentage point increase from the previous month, signaling robust business sentiment. However, a closer look at unadjusted data reveals that out of 23 surveyed sectors, eight improved, fourteen declined, and one remained unchanged compared to June.

Construction Navigates Uncertainty

Despite a slight month-on-month decrease of 0.5 percentage points, the construction sector maintained an uncharacteristically optimistic environment in July. The seasonally adjusted confidence indicator stood at -9.0, a level that continues to be high for this industry, indicating persistent positive outlooks among construction firms.

Retail Trade and Services Show Divergent Trends

Retail trade experienced a notable uplift, with its seasonally adjusted confidence indicator climbing to 1.4 in July. This marks an increase of 0.8 percentage points from June. Conversely, the services sector saw a slight deterioration, with its confidence indicator at zero, a 0.9 percentage point decrease from the prior month.

Overall economic uncertainty in the country decreased in July, with the Total Economic Uncertainty Index falling by 0.9 percentage points to 11.8. Businesses reported a reduction in perceived economic uncertainty in manufacturing and services, while retail trade and construction experienced a slight increase.

The economic sentiment indicator for Latvia stood at 99.5 in July, a marginal increase from 99.1 in June. However, the Employment Expectations Indicator has shown volatility, dropping to 98.2 in July, falling below its long-term average, suggesting potential shifts in future hiring plans.

As of Q1 2024, Latvia’s manufacturing sector contributed significantly to its GDP, with exports in the sector growing by 4.5% year-on-year, according to the Bank of Latvia’s latest report (Bank of Latvia, 2025).