Business tendency survey for manufacturing, mining and quarrying, Q1 2007

According to the Business tendency survey, the Norwegian manufacturing industry experienced an increase in output and capacity utilisation in the first quarter of 2007, in addition to further growth in employment. A high level of new orders in the domestic market seems to compensate for a somewhat weaker growth in export markets and contributes to maintain a heavy build-up of total stocks of orders. Relatively few managers are citing fierce competition and lack of demand as limiting factors for production. This result is reflected by a strong growth in market prices. The indicator of resource shortage¹(see table 16 ) reached an even higher level in the first quarter. Full capacity utilisation seems to pose an ever greater challenge for the manufacturing industry.

The average number of working months covered by the current stock of orders is significantly higher than the corresponding result for 2006 and has reached a very high level. The fact that this indicator makes a significant jump upwards in the first quarter implies that the businesses are receiving new orders at a faster rate than they are able to execute them (see Statistics on new orders ), and this is an another signal of lack of capacity in manufacturing. An increase in the number of respondents who claim they are considering an increase in planned gross capital investments also implies a desire to improve the production capacity. Average capacity utilisation in the Norwegian manufacturing industry is estimated to about 85 per cent. International comparisons of results for the average capacity utilisation are available from EUROSTAT .

A large number of managers consider the general short-term outlook (Q2 2007) to be better. Expectations of a further rise in output and new orders, in addition to improved market prices are explanatory factors. The industrial confidence indicator² is estimated to be 15 (seasonally adjusted net figure). This is somewhat lower than in the previous survey, but still a strong indication of sustained growth in output in the forthcoming quarter. International comparisons of results for the industrial confidence indicator are available from EUROSTAT (EU) and The Swedish National Institute of Economic Research (Sweden).

High prices on intermediate goods

Sectors producing intermediate goods (pulp, paper and paper products, chemical industry, basic metals etc) experienced an increase in output and capacity utilisation in the first quarter of 2007. There are also indications of higher employment. Less growth in new orders from export markets somewhat weakens the build up of total stocks of orders, but this is still very strong. The same goes for the development in market prices. The number of managers who report that lack of capacity and/or shortage of qualified labour limit production is significantly higher than the corresponding result for 2006. This is also the case for the number of working months covered by the current stock of orders. The fact that a growing number of respondents claim they are considering an increase in planned gross capital investments implies a desire to strengthen production capacity. Average capacity utilisation is estimated to about 86 per cent in the first quarter of 2007.

A large number of managers consider the general short-term outlook to be better, but fewer managers share this opinion. It is difficult to point at a particular reason for this result since the indicators covering the expected development in the subsequent quarter are more or less unchanged from the previous survey.

High temperature in engineering industries

Sectors producing capital goods (metal products, machinery and equipment, offshore-related activity etc) report higher levels of production, capacity utilisation and employment. At present there is no sign of weaker growth in new orders from domestic or export markets, and market prices are higher than recorded in the previous survey. The number of managers who report that lack of capacity, shortage of qualified labour and insufficient supply of raw materials or shortage of electric power limit production is significantly higher than corresponding result for 2006. The same goes for the average number of working months covered by the current stock of orders. 54 per cent of the respondents claim they have full capacity utilisation, while average capacity utilisation for producers of capital goods is estimated to be as high as 90 per cent in the first quarter.

The number of managers considering the general short-term outlook to be better is very high, but somewhat fewer share this opinion. Lack of capacity and shortage of qualified labour, e.g. engineers, are possible explanations for this result. The growth in output, employment and new orders is expected to continue in the current quarter.

Higher demand for consumer goods

Sectors producing consumer goods (food industry, publishing, pharmaceutical industry etc) report a solid growth in total output. The level of employment also seems to rise. Growing demand in the domestic market is the driving force behind this development. The fact that very few managers point at fierce competition in the domestic market as a factor that limits production supports this result. Average capacity utilisation is estimated to be about 80 per cent in the first quarter, which is a very good result from a historical perspective.

A high number of managers claim they consider the general short-term outlook to be better. Prospects of high demand and rising prices in the domestic market are likely explanations for this result.

¹This 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.

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