According to the Business Tendency Survey conducted by EK in October, the business outlook of Finnish companies already took a turn for the worse in the late summer and early autumn. The third-quarter trend, especially in manufacturing, was weaker than expected.
Divergence between different sectors remains highThe business outlook for the coming months has deteriorated significantly and the degree of divergence between companies and sectors has continued to grow. Business is expected to suffer in all the main sectors during the next six months.
Industrial production and service sector sales, however, are forecast to grow very slightly during the coming six months. In construction, production will remain at its current level. Labour force expectations are cautious in all sectors, with employment in manufacturing expected to even drop slightly.
The manufacturing industry business outlook indicator for October was -20 (+9 in July). Of the respondent companies, 16% expected the economy to pick up towards the end of the year and early next year, while 36% thought the situation would take a turn for the worse.
In October, the business outlook indicator for construction declined to -45 (+7 in July). 3% of respondents expected an improvement in the economy and 48% expected a deterioration.
The outlook for service companies in October declined to -15 (+11 in July). 8% of companies expected the economy to strengthen, while 23% expected a turn for the worse.
Early-autumn performance weaker than expectedThe manufacturing companies that responded to the survey received fewer new orders in the third quarter than in the second. The trend was weaker than expected three months ago. Orders in the construction sector were also slightly down. Manufacturing companies’ order backlog declined slightly and is currently described as somewhat below average. Similarly, the construction sector’s order backlog shrank to slightly below the normal level.
Finished goods inventories grew in manufacturing to slightly above normal. Construction companies still have few unsold homes, even though the number increased compared with early summer.
Manufacturing companies that responded to the survey expect the number of new orders they will receive during the latter part of the year to remain unchanged. Orders are expected to be down slightly in the construction sector.
Manufacturing output fell clearly below expectations, as production quantities began to decline moderately in late summer. However, output is forecast to grow slightly during the latter part of the year and early next year. Construction output grew moderately, although production figures for the end of the year are not expected to change much.
In the service sectors, sales growth was fairly brisk in the early autumn. Growth is forecast to slow down somewhat in the latter part of the year, although according to estimates, the growth rate will remain moderate.
Manufacturing companies’ capacity utilisation fell slightly, and is now below the long-term average level. In October, 37 per cent of manufacturing companies had some idle capacity (28 per cent in July).
Employment growth expectations quite cautiousThe labour force grew somewhat in construction and services. The employment trend in construction was weaker than estimated, with the labour force contracting slightly. In construction and services, the labour force is forecast to remain at its current level during the latter part of the year. The manufacturing labour force is expected to continue to decline somewhat.
Rise in prices and costs is expected to level out slightlyThe rise in sales prices slowed down in all the main sectors. In manufacturing the rise was small, while in construction it came to a complete halt in the third quarter. The rise in costs continued, but upward pressures on costs levelled off somewhat.
Service companies expect the rise in prices to slightly pick up again during the latter part of the year. In manufacturing, the rise is expected to continue to slow down, and in construction, prices are expected to begin to decline somewhat. Costs in the services sector are expected to continue their general rise, while in other sectors the rise in costs would continue to decelerate.
Profitability improved somewhat in manufacturing and services. In construction, profitability remained unchanged. Future profitability is estimated to remain unchanged in construction and to improve slightly in manufacturing and services.
Labour shortages continued to be commonplace in construction and services. 31% of construction companies and 18% of service companies suffered from a lack of skilled labour, whereas only 4% of respondents in the industrial sector suffered from labour shortages. Insufficient demand was the main bottleneck in manufacturing, with 35% of companies identifying it as a problem.
EK Business Tendency Survey
The Confederation of Finnish Industries EK’s Business Tendency Survey is published four times per year. The survey has been carried out regularly since 1966. 1,016 companies employing approximately 270,000 people in Finland replied to the survey carried out in October 2011.
03.11.2011
Confederation of Finnish Industries
http://www.ek.fi/ek/en/business_outlook_weakened_notably_during_the_autumn-8126
