Business tendency survey for manufacturing, mining and quarrying, Q4 2008

According to the business tendency survey, the Norwegian manufacturing industry experienced a decline in output and employment in the fourth quarter of 2008. Poor results for sectors producing intermediate goods were the 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. Lack of demand is a growing concern among Norwegian industrial managers. High growth in stocks of finished goods supports this view. However, lack of capacity and shortage of qualified labour no longer seem to pose a major problem. The number of working months covered by the current stock of orders is somewhat lower than recorded in the third quarter, but the result is still quite high seen in a historical perspective. Average capacity utilisation is estimated to be 80.2 per cent. International comparisons of average capacity utilisation are available from EUROSTAT .

The general short-term outlook is considered to be negative. Expectations of a further decline in production, new orders and export market prices support this result. A growing number of industrial managers claim to be considering a reduction in planned gross capital investments. Prospects of poor demand and a shortage of venture capital are mentioned as reasons for such a decision. The industrial confidence indicator is estimated at -23 (seasonally-adjusted net figure) in the fourth quarter. This is far below the historic average and indicates a steep decline 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).

Poor results for sectors producing intermediate goods

Sectors producing intermediate goods (wood and wood products, pulp, paper and paper products, the chemical industry, basic metals and so on) experienced a further a decline in output and employment. A low level of new orders from both domestic and export markets was the reason for this development. The domestic market appears to be hugely affected by a harsh slowdown in the construction business, which is creating a poor market for building materials. With regard to the export markets, several sectors appear to have been hit by the fall in the global demand. Export prices are down in spite of the weaker Norwegian currency. Lack of demand is a growing concern among the respondents in question. However, lack of capacity and shortage of qualified labour no longer seem to pose a major problem. The number of working months covered by the current stock of orders is lower than recorded in the third quarter, and average capacity utilisation is estimated to be 77.9 per cent. The general short-term outlook is considered to be negative. Expectations of a further decline in production, new orders and market prices support this result. A huge majority of the industrial managers claim to be considering a reduction in planned gross capital investments.

Still high production of capital goods

Sectors producing capital goods (machinery and equipment, offshore-related activity and so on) experienced a very high level of production, but the growth rate was close to neutral. Total stocks of orders fell due to a decline in new orders from domestic and export markets. Many respondents also mentioned that there is a higher risk of cancellations of existing orders. Market prices continued to rise in the fourth quarter but the growth rate shows signs of levelling out. Lack of demand is a growing concern among the respondents in question, but fewer indicate lack of capacity or shortage of qualified labour. Average capacity utilisation is estimated to be 85.8 per cent in the fourth quarter. The number of working months covered by the current stock of orders is somewhat lower than recorded one year ago, but still remains at a very high level. The indicator covering the general short-term outlook is changing from neutral to negative, and a growing number of industrial managers claim to be considering a reduction in planned gross capital investments.

Rising prices on consumer goods

Sectors producing consumer goods (like the food industry, publishing, pharmaceutical industry and so on) report that the growth in total output was levelling out in the fourth quarter. Poorer demand from export markets seems to be the reason for this result. A decline in new orders for durable consumer goods like furniture partly explains this development. Total employment fell in the second half of 2008, and the decline grew stronger towards the end of the year. Market prices, however, continued to rise. A strong growth in prices of food products was the main reason for this. Average capacity utilisation is estimated at 77.7 per cent in the fourth quarter. The indicator covering the general short-term outlook is changing from positive to negative. Expectations of lower demand in export markets and a further decline in employment support this result.