Optimism in manufacturing

The business tendency survey for the fourth quarter of 2017 shows an increase in total production compared with the third quarter of 2017. For manufacturers of capital goods there was an improvement in output after a fall since the third quarter of 2014. There is an improvement among suppliers to the oil and gas industry such as in machinery and equipment, and repair, installation of machinery, while the construction of ships and oil platforms still reports lower production.

Producers of intermediate goods reported a moderate growth in production in the fourth quarter of 2017, with an improvement among industries such as fabricated metal products and wood and wood products, while paper and paper products had a fall in production. The production of consumer goods was virtually unchanged after a fall in the three previous quarters.

The overall employment shows a moderate increase in the fourth quarter of 2017 after being negative since the fourth quarter of 2013. There was an increase for producers of intermediate goods but a decrease for producers of capital goods. For the producers of consumer goods, the employment was almost unchanged.

Increase in new orders from the domestic market

New orders from the domestic market show an increase in the fourth quarter of 2017, while new orders from export markets show a slight increase. The total stock of orders increased during the same period. Looking at the different industrial groupings, the producer of intermediate goods shows an increase in new orders from the domestic market and in the total stock of orders, while new orders from the export market were almost unchanged. Producers of capital goods show an increase in new orders from the domestic market, and a slight increase in new orders from the export market, and an increase in the total stock of orders. For producers of consumer goods there was an increase in new orders from the export market, while new orders from the domestic market and the stock of orders were virtually unchanged. 

Prices went up for both export and domestic markets for the manufacturing industry in the fourth quarter. A weakening in the exchange rate of the Norwegian currency against key trading partners can help explain the rise in prices in the export market. 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 first quarter of 2018

The general outlook for the first quarter of 2018 is clearly positive. The share of business leaders who feel optimistic about the coming quarter is greater than 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. Employment is expected to increase during the first quarter of 2018. Producers of capital goods, intermediate goods and consumer goods are all optimistic in their assessment of the first quarter of 2018.

The industrial confidence indicator for the fourth quarter of 2017 was 6.4 (seasonally adjusted net figures),up from 3.2 in the previous quarter. This is over the historical average of 3.0, and is the highest value since the second quarter of 2014. 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 decrease in capacity utilisation

The average capacity utilisationfor  for Norwegian manufacturing went slightly down and was calculated to 77.8 per cent at the end of the fourth quarter of 2017, compared with 77.9 in the third 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 4.0 in the fourth quarter of 2017. This is slightly lower than the previous quarter when it was 4.1, but is above the historical average for the indicator of 3.9.

The resource shortage indicator went slightly down 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, there are fewer business leaders who report that weak demand or strong competition are limiting factors for production.

Timelines

 

The survey data was collected in the period from 7 December 2017 to 18 January 2018.

Assessment of Q4 2017 and the short-term outlook¹