Business tendency survey for manufacturing, mining and quarrying, Q3 2008

According to the business tendency survey¹, the Norwegian manufacturing industry experienced a slowdown in total output in the third quarter. Poor results for industries that rely on demand from the construction business are the main reason for this development. Total stocks of orders fell due to a decline in new orders from domestic and export markets, while market prices continued to rise. A weaker Norwegian currency and higher costs due to rising prices of input factors are likely explanations for this development. Bottlenecks in the production (see table 16 ) still pose a major concern in some industries, but shortage of qualified labour seems to be less important than in the first two quarters of the year. At the same time there is an increase in the number of managers reporting that weak demand and growing competition are limiting production factors. The number of working months covered by the current stock of orders is somewhat lower than the corresponding figure for 2007. The average capacity utilisation is estimated to be 83 per cent. International comparisons of average capacity utilisation are available from EUROSTAT .

The indicator covering the general short-term outlook is changing from positive to negative. Expectations of weaker demand from export markets support this result. The turbulence in international financial markets may also influence the judgment of the short-term outlook. The industrial confidence indicator is estimated at -6 (seasonally-adjusted net figure) in the third quarter. This is well below the historic average and indicates a change in the business cycle. International comparisons of the industrial confidence indicator are available from EUROSTAT (EU) and the Swedish National Institute of Economic Research (Sweden).

Lower demand from construction

Sectors producing intermediate goods (wood and wood products, pulp, paper and paper products, the chemical industry, basic metals and so on) experienced a decline in output and employment, but the overall picture is somewhat mixed. Producers of wood and wood products and other non-metallic mineral products seem to be affected by a slowdown in the construction business and contribute to the poorer results. Market prices continue to grow in spite of a decline in new orders. It is likely that a weaker Norwegian currency contributes to this development. The number of working months covered by the current stock of orders is somewhat lower than the corresponding figures for 2007. Average capacity utilisation is estimated to be 82 per cent in the third quarter.

A higher number of the industrial managers consider the general short-term outlook to be negative. Expectations of a decline in employment and new orders support this result.

High stocks of new orders secures growth in total output

Sectors producing capital goods (machinery and equipment, offshore-related activity and so on) experienced a moderate increase in output and employment. Total stocks of orders fell due to a decline in new orders from domestic and export markets, while market prices continued to rise. Higher costs due to rising prices of input factors contribute to this development. A shortage of qualified labour still poses a major challenge for the industries in question. However, lack of capacity no longer seems to constitute a major problem. The number of working months covered by the current stock of orders is somewhat lower than recorded one year ago, but remains at a very high level. Average capacity utilisation is estimated to be 87.8 per cent in the third quarter.

Fewer industrial managers consider the general short-term outlook to be better, but those who share this opinion are still in the majority. The fact that the industrial managers are considering a reduction in planned gross capital investments might be interpreted as a sign of negative prospects in the long run.

Strong growth in prices of consumer goods

Sectors producing consumer goods (like the food industry, publishing, pharmaceutical industry and so on) experienced a rise in total output. High demand in domestic markets explains this result. Market prices continued to rise. A strong growth in prices of food products was the main reason for this development. Average capacity utilisation is estimated at 79.6 per cent in the third quarter.

A majority of the respondents consider the general short-term outlook to be better. Prospects of a further increase in demand and market prices support this result.

¹ Survey data are collected in the period 10 September to 20 October. Consequently, both before and after the international financial crisis had fully taken off.