Business tendency survey for manufacturing, mining and quarrying, Q2 2009

According to the business tendency survey, the Norwegian manufacturing industry experienced rough conditions in the second quarter this year. There was a further decline in output and employment, and total stocks fell due to a lack of new orders in domestic and export markets. Many point at poor demand as a factor that limits production. This view is confirmed by a fall in market prices. Bottlenecks such as lack of capacity, shortage of qualified labour and supply of raw materials or electric power played no major role in restricting production. The number of working months covered by the current stock of orders remained quite high, but was significantly lower than in the corresponding quarter of 2008. Average capacity utilisation has fallen to 76 per cent. International comparisons of average capacity utilisation are available from EUROSTAT .

The general short-term outlook (Q3 2009) is considered to be poor, but fewer respondents share this view than in the previous survey. The industrial confidence indicator is estimated at -7 (seasonally-adjusted net figure). This is significantly higher than recorded in the previous survey. A reduction in stocks of finished goods is one of the reasons for this development. However, the result lies well below the historic average and indicates a further weakening of the business cycle. The decline is expected to be somewhat less steep than in the first half of 2009 (see Index of production ). International comparisons of the industrial confidence indicator are available from EUROSTAT (EU) and the Swedish National Institute of Economic Research (Sweden).

Lower stocks of finished goods

Sectors producing intermediate goods (wood and wood products, paper and paper products, non-metallic mineral products, basic metals etc.) experienced a significant decline in output and employment in the second quarter, and the market prices continued to fall. A low level of new orders in domestic and export markets explains these results. Lack of demand and fierce competition were considered as major bottlenecks by the respondents in question. The number of working months covered by the current stock of orders was significantly lower in the second quarter this year than in the same period last year, and average capacity utilisation fell to 73 per cent.

The general short-term outlook (Q3 2009) is considered to be poor, but somewhat fewer respondents share this view. Expectations of improved conditions for producers of wood and wood products partly explain this development. A decline in stocks of finished goods should also create a need to increase the production.

Weak demand causes decline in total stocks

Sectors producing capital goods (machinery and equipment, ships, boats and oil platforms etc.) experienced a decline in output and the level of new orders. However, total stocks of orders were still quite high. Market prices continued to fall in the second quarter, and the same was the case with employment. Lack of demand was a major concern among the respondents in question. Lack of capacity and shortage of qualified labour no longer seem to be a problem. Average capacity utilisation has fallen to 81.3 per cent. The number of working months covered by the current stock of orders remained at a high level, but the trend for this indicator is clearly negative.

The industrial managers within sectors producing capital goods consider the general short-term outlook to be poor, and many of them are considering a reduction in planned gross capital investments. Expectations of a further decline in output and demand support this result.

Growing optimism among producers of food products and beverages

Sectors producing consumer goods (food products, printing and reproduction, basic pharmaceuticals, furniture etc.) experienced a further decline in output and employment. Poorer demand from domestic markets and export markets explains these results. Market prices, however, continued to rise. A strong growth in prices of food products was the main reason for this development. Average capacity utilisation is estimated to be 73.7 per cent.

The indicator covering the general short-term outlook in these sectors is changing from neutral to positive. Expectations of improved conditions for producers of food products and beverages partly explain this result.