Business tendency survey for manufacturing, mining and quarrying, Q3 2006

According to the Business Tendency Survey, the Norwegian manufacturing industry experienced growth in output and the level of employment in the third quarter of 2006. The total stock of orders is higher due to a rise in new orders received from the domestic and export markets, and market prices are improving. Conditions appear to be particularly favourable in export markets. This view is supported by the fact that the number of managers who cite fierce competition and lack of demand in export markets as limiting factors for production is significantly lower than the corresponding figure for 2005. High demand for certain products combined with a weakening of the Norwegian currency constitute likely explanations for the positive development in export prices.

Full capacity utilisation and shortage of qualified labour seem to pose an ever bigger challenge to producers within certain industries. The number of managers that report insufficient supply of raw materials or shortage of electric power is slightly higher than the corresponding figure for 2005. The combined effect of these results is reflected in a further rise in the indicator of resource shortage¹ (see table 16 ). The average number of working months covered by the current stock of orders is more or less at the same level as recorded in the first six months of 2006, but is still somewhat higher than the corresponding figure for 2005. Average capacity utilisation is estimated to be about 84 per cent, which is a high percentage from a historical perspective.

A clear majority of the industrial managers judge the general short-term outlook (Q4 2006) as better. The industrial confidence indicator² is estimated to be 16 (seasonally adjusted net figure), which is a strong indication of sustained growth in output in the forthcoming quarter. Lack of capacity within certain industries causes some production to be postponed. International comparisons of results for the industrial confidence indicator are available from EUROSTAT (EU) and The Swedish National Institute of Economic Research (Sweden).

Intermediate goods: Growth in new orders

Sectors producing intermediate goods (pulp, paper and paper products, chemical industry, basic metals etc.) report growth in output, capacity utilisation and the level of employment. An increase in new orders from the domestic and export markets means a rise in the total stock of orders, and continued improvement in market prices. The number of managers that cite lack of demand as a limiting factor for production is significantly lower than the corresponding figure for 2005. However, lack of capacity and shortage of qualified labour seem to constitute a major bottleneck. There is also a small increase in the number of managers that report insufficient supply of raw materials or shortage of electric power. The average capacity utilisation is estimated to be about 85 per cent.

The general short-term outlook is considered to be better. Expectations of a rise in new orders and market prices support this result.

Capital goods: Expectations of an increase in gross capital investments

Producers of capital goods (metal products, machinery and equipment, offshore-related activity etc.) report considerable growth in output, capacity utilisation and the level of employment. An increase in new orders from domestic and export markets means a rise in the total stock of orders, while lack of spare capacity contributes to a further improvement in market prices. Only a small number of managers cite fierce competition and lack of demand as limiting factors for production. However, shortage of qualified labour and full capacity utilisation constitute major limiting factors for production. The average number of working months covered by the current stock of orders is estimated to be 8.3; the highest result that is recorded in the survey. Average capacity utilisation is estimated to be about 88 per cent.

A growing number of managers consider the general short-term outlook to be even better. Expectations of additional growth in new orders and market prices support this view. Lack of capacity and shortage of qualified labour do not leave much room for further improvement in output. This means that part of the production must be postponed. Signs of an increase in planned gross capital investments could result in higher production capacity in the years to come.

Consumer goods: Growth in capacity utilisation

The results from sectors producing consumer goods (food industry, publishing, pharmaceutical industry etc.) indicate improved market conditions. An increase in demand and positive development in price levels in the domestic and export markets give rise to growth in output, capacity utilisation and employment. The number of establishments running at full capacity has increased in relation to corresponding figures for 2005, and the share of managers citing lack of capacity as a limiting factor for production has risen slightly. Average capacity utilisation is estimated to be about 79 per cent. This is the highest level measured since 1998. When comparing results for the average capacity utilisation over time, it is important to take into account that a considerable number of less competitive businesses have shut down since 1998.

The general short-term outlook is considered to be positive, but fewer managers than in the previous quarter share this opinion. A growing number of managers say that they are considering a reduction in planned gross capital investments.

¹ This indicator sums up response alternatives from the question related to factors limiting production in the current quarter and which relate to access to resources, together with the response distribution of full capacity utilisation.

² The industrial confidence indicator and links to international comparisons are described in the press release Q3 2003 (see Previous articles )