EK Business Tendency Survey: Outlook inconsistent and uncertain
Slight weakening in economy is expected in latter part of year. According to the Business Tendency Survey conducted by the Confederation of Finnish Industries (EK) in July, Finnish companies’ business growth was moderate in the early summer, but the current economic situation is still slightly weaker than average in all the main sectors.
There was a small amount of growth in the volume of new orders and in output, but a slight contraction occurred in the labour force, with the exception of the service sectors.
The business outlook for the coming months has weakened somewhat in all the main sectors. The outlook for manufacturing varies substantially from one company to another, but, on average, business is expected to remain almost unchanged in the latter part of the year. In services and especially in construction, business is expected to weaken somewhat.
Output growth and sales growth are expected to be nearly at a standstill in the coming months. Personnel expectations are also cautious, and the labour force is expected to decline slightly.
In July, the business outlook indicator for manufacturing was 3 (+9 in April). In the most recent survey, 14% of respondents expected an improvement in the economy in the latter part of the year, while 17% of companies forecast a decline.
The business outlook indicator for construction sank to 27 in July ( 5 in April). An upturn was now forecast by only 1% of the respondents, while 28% forecast a decline.
The business outlook indicator for service companies was 6 in July (+2 in April), with 6% of respondents forecasting an upturn and 12% expecting a turn for the worse.
Output growth nearly at a standstill
New orders received by manufacturing companies responding to the survey grew a little in the spring and early summer. Orders in the construction sector were slightly down. In both manufacturing and construction, order books were described as slightly smaller than average. Finished goods inventories increased in manufacturing to slightly above average levels. In construction, the number of unsold dwellings is described as normal.
Manufacturing companies are expecting a steady flow of orders for the early autumn. Orders in the construction sector are forecast to decline slightly.
In manufacturing, output growth continued in the early summer, but the rate was rather slow, as expected. Output is expected to continue growing at a very sluggish pace in the coming months, while in the fourth quarter output is not expected to grow anymore. The output of construction companies responding to the survey declined, based on seasonally adjusted figures. In the coming months, output is expected to remain the same or to decrease slightly.
Service sector sales continued to rise, but the growth slowed substantially in the early summer. Slow growth is forecast for the coming months as well, and no substantial acceleration is expected to take place during the fourth quarter either.
Manufacturing companies’ capacity utilisation rose to near the long-term average. In July, 27% of manufacturing companies had some idle capacity (35% in April).
Employment trend best in service sectors – expectations now weaker here, too
The service sectors’ labour force grew a fraction more in the early summer. However, in manufacturing and construction, the labour force declined slightly in relation to the first quarter.
Employment expectations are cautious as labour force growth in the service sectors is forecast to end in the coming months. In manufacturing and construction, the slow decline in the number of employees is expected to continue.
Sales prices rose slightly in manufacturing. In services, the rise in prices slowed, and in construction prices remained steady. The rise in costs continued in all sectors, but in manufacturing and services the strongest pressure on costs eased in the early summer.
In the coming months, prices are expected to stay the same in manufacturing and to decline slightly in construction. In services, the rate of price increases is expected to slow further. Costs are expected to remain steady on average in manufacturing. In construction the rise in costs is expected to remain fairly rapid, while in services the cost rise is expected to slow down further.
Profitability weakened a little in manufacturing and services, and in construction the weakening was slightly faster. Profitability is expected to remain steady or decrease slightly in the future.
Insufficient demand was indicated as the most significant growth obstacle in manufacturing and services, while in construction both labour shortages and insufficient demand are prevalent. Demand was weak for around a third of manufacturing and construction companies and for one in four service companies. A labour shortage was experienced by 6% of respondents in manufacturing, 14% in services and as much as 34% in construction.
EK Business Tendency Survey
The Business Tendency Survey is published four times a year by the Confederation of Finnish Industries. The survey has been carried out regularly since 1966, and is a part of the European Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys. A total of 930 companies employing approximately 228,000 people in Finland replied to this survey, which was carried out in July 2012.
Further information: Penna Urrila, tel. +358 (0)9 4202 2606 or +358 (0)40 570 7860
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