Business tendency survey for manufacturing, mining and quarrying, Q2 2007

According to the business tendency survey, the Norwegian manufacturing industry experienced a further increase in output and employment in the second quarter of 2007, and the average number of working months covered by the current stock of orders was significantly higher than in the corresponding quarter of 2006. A further rise in new orders from domestic and export markets fuels this development and also causes market prices to increase. Bottlenecks in the production still pose a major challenge within large areas of the manufacturing industry (see table 16 ). Widespread use of foreign labour and outsourcing of some of the production are two ways of coping with this problem. In the long run it is possible to increase the production capacity by investing in machinery and new production facilities. The fact that a growing number of managers say that they are considering an increase in planned gross capital investments implies that this is happening as we speak (see Quarterly investments statistics). The average capacity utilisation in the Norwegian manufacturing industry is estimated to about 85 per cent. This is the same level as recorded in the previous survey and a high result from a historical perspective. International comparisons of average capacity utilisation are available from EUROSTAT .

A large number of managers still consider the general short-term outlook (Q3 2007) to be better. Expectations of further growth in output and market prices support this result. The industrial confidence indicator¹ is estimated to be 12 (seasonally adjusted net figure). This is a somewhat lower level than recorded in the previous surveys, but still well above the historical average. International comparisons of the industrial confidence indicator are available from EUROSTAT (EU) and The Swedish National Institute of Economic Research (Sweden).

High prices of intermediate goods

Sectors producing intermediate goods (pulp, paper and paper products, chemical industry, basic metals etc) experienced a rise in output and the level of employment in the second quarter. A somewhat weaker growth in new orders from domestic and export markets dampens the growth in total stock of orders, but demand still seems to be strong. The positive development in market prices supports this result. Relatively few managers cite competition and lack of demand as limiting factors for production, but lack of capacity and shortage of qualified labour still pose a major challenge. The average capacity utilisation is estimated to about 86 per cent in the second quarter. This is the same result as in the previous survey. The average number of working months covered by the current stock of orders is somewhat higher than in the corresponding period of 2006.

A majority of the managers still consider the general short-term outlook to be better. Expectations of further growth in new orders and market prices support this result. Bottlenecks in production are a likely explanation for a reduction in the number of managers who share this view.

Increased production of capital goods

Sectors producing capital goods (metal products, machinery and equipment, offshore-related activity etc.) experienced significantly higher output than in the first quarter. In spite of this, total stocks of orders grew at almost the same rate as recorded in previous surveys. A further rise in new orders from domestic and export markets explains this result. 37 per cent of the respondents point at lack of qualified labour as a factor that limits production, and well above 50 per cent claim to have full capacity utilisation. These results to some extent explain the high level of the indicator of resource shortage²(see table 16 ). High demand and resource shortage are factors which cause market prices to rise. The average capacity utilisation in the second quarter is estimated to about 90 per cent, which is very high. The average number of working months covered by the current stock of orders is significantly higher than in the corresponding period of 2006.

A majority considers the general short-term outlook to be better, but somewhat fewer managers share this view. This development cannot be explained by a decrease in new orders or weaker market prices. Bottlenecks in the production are therefore a likely cause. A rise in the number of respondents who say that they are considering an increase in planned gross capital investments supports this assumption.

High demand for consumer goods in domestic markets

Sectors producing consumer goods (food industry, publishing, pharmaceutical industry etc.) experienced growth in total output, and employment seems to be somewhat higher than in the first quarter. High demand particularly in domestic markets fuels this development. Average capacity utilisation remains at about 80 per cent, which is a very good result from a historical perspective.

More managers say that they consider the general short-term outlook to be better. Prospects of high demand and rising prices in the domestic market support this result. A growing desire to increase gross capital investments may be a sign of optimism also in the medium run.

¹ The industrial confidence indicator and links to international comparisons are described in the press release Q3 2003 (see Previous articles ).

² 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.