Positive signals from manufacturing

The business tendency survey for the third quarter of 2017 shows a moderate increase in total production compared with the second quarter of this year. From a significant drop in production, manufacturers of capital goods are now showing signs of improvement and the reduction in output is levelling off. The reduced activity among suppliers to the oil and gas industry since mid-2014 is therefore no longer curbing the overall manufacturing output to the same degree.

Producers of intermediate goods reported a growth in production in the third quarter. At the same time, there was a lower level of production among producers of consumer goods. The food and beverage industry in particular was a major contributor to the decline in consumer goods. 

The overall employment was more or less unchanged in the third quarter of 2017. While producers of intermediate goods report some increase in employment, there was still a decline for producers of capital goods. However, it is worth noting that far fewer producers of capital goods reported an employment decline than in the previous quarter.

Moderate increase in new orders in the third quarter

New orders from domestic and export markets show a moderate increase in the third quarter of 2017, while the total stock of orders remained unchanged during the same period.  Looking at the different industrial groupings, producers of intermediate goods show the best development in relation to the increment of new orders both from the domestic and export market. At the same time, the total stock of orders increased during this period. Producers of capital goods still show a decline in new orders from the export market, while the level of new orders from the domestic market has stabilised. The stock of orders for manufacturers of capital goods is still decreasing, but fewer business leaders reported a decline during this quarter compared to the last one. For producers of consumer goods, there was an increase in new orders from the export market.

Prices went up for both export and domestic markets for the manufacturing industry in the third quarter. Producers of intermediate goods and consumer goods saw an increase in prices in both markets. For producers of capital goods, there was still a negative trend in prices in both markets. Two likely explanations for the decline are the requirement for oil companies to reduce development and maintenance costs, and the fierce competition for supplier contracts in the oil and gas industry.

Positive expectations for the fourth quarter of 2017

The general outlook for the fourth quarter of 2017 is positive. The share of business leaders who feel optimistic about the coming quarter is approximately the same as in the previous survey. Industry leaders report that investment plans are adjusted upwards and new orders from both the domestic market and export market are expected to increase. The total stock of orders is also expected to increase. Meanwhile, employment will see a further drop. Producers of capital goods, intermediate goods and consumer goods are all optimistic about the fourth quarter. 

The industrial confidence indicator for the third quarter was 2.3 (seasonally adjusted net figures), down from 3.7 in the previous quarter. This is slightly below the historical average of 3.0. Values above zero indicate that total output will grow, while values below zero indicate that total output will fall. International comparisons of the industrial confidence indicator are available from Eurostat (EU), The Swedish National Institute of Economic Research and Statistics Denmark.

¹ Industrial confidence indicator is the arithmetic average of the answers (balances) to the questions on production expectations, total stock of orders and inventories of own products (the latter with inverted sign).

Marginal increase in capacity utilisation

The average capacity utilisationfor Norwegian manufacturing went up slightly, and was calculated to 77.8 per cent at the end of the third quarter of 2017, compared with 77.6 in the second quarter of 2017. This is below the historical average of 80.2 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).

The average number of working months covered by the current stock of orders was 4.1 in the third quarter of 2017. This is the same value as in the previous quarter, and is above the historical average for the indicator of 3.9. 

The resource shortage indicator went up slightly compared with the previous quarter. There is still little shortage of labour, good access to raw materials and electrical power, and few industry leaders are reporting full capacity utilisation. At the same time, fewer business leaders report that weak demand or strong competition are limiting factors for production. 

Timelines

The survey data was collected in the period from 7 September to 18 October 2017. 

Assessment of industries in Q2 2017 and the short-term outlook