Lower optimism in manufacturing for the next quarter
Norwegian industrial managers report an increase in the production level in the third quarter of the year. The general outlook for the fourth quarter of 2019 is considered to be positive by the majority of industry leaders, but the share of optimists are lower than in the previous quarter.
- Full set of figures
- Business tendency survey for manufacturing, mining and quarrying
The business tendency survey for the second quarter of 2019 shows a positive development compared to the second quarter of 2019. The growth is particularly strong among producers of intermediate goods and capital goods who report increased production. Producers of consumer goods report a flat activity level in the third quarter.
The industrial leaders also report growth in employment in the third quarter of 2019, but the growth is more moderate than in the second quarter. The increase in employment is particularly strong for capital goods. There is reason to believe that this is related to the growth in oil investments. Producers of intermediate goods also report employment growth, while producers of consumer goods are reporting decreased employment.
Figure 1. Production and employment for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
|Turning point value||Total volume of production||Average employment|
Flat development in the total stocks of orders
After reporting growth in the total stocks of orders for seven consecutive quarters, the producers report unchanged stocks of orders for the third quarter. Producers of consumer goods still report growth while the producers of capital goods and intermediate goods report a flat development in the total stocks of orders during this quarter.
The flattening in the total stocks of orders is due to the fact that the growth in new orders has not been higher than the growth in deliveries in the third quarter. New orders from the export market have gone from growth to a flat development from the second to third quarter, which is due to reduced demand for Norwegian intermediate goods. It is especially industrial leaders within the industries basic chemicals and basic metals who report lower new orders for the export market. This decrease is probably due to lower international growth, which results in lower demand for Norwegian export goods. The decrease comes in spite of a weak Norwegian currency, which – in isolation – improves competitiveness. Industrial leaders report growth in new orders from the domestic market for the third quarter.
Figure 2. New orders received for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
|Turning point value||New orders received from home markets||New orders received from export markets|
For more than two years now it has been reported growth in price level both in the home and export market for overall manufacturing. The growth rate has indeed decreased in the last year in both markets. The growth in the export prices are at very moderate level in the third quarter. Producers of consumer goods and capital goods report growth in prices in both markets while the producers of intermediate goods reports fall in prices in the export market and unchanged prices in the domestic market.
Figure 3. Prices on products for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
|Turning point value||Prices on products at home markets||Prices on products at export markets|
Diminished optimism for the fourth quarter
The general outlook for the fourth quarter of 2019 is positive for overall manufacturing, but the numbers of leaders that looks optimistic about the coming quarter is lower than in the previous survey. Still, the industry leaders report upward adjusted future investment plans, and it is expected new orders from both the domestic and the export market, but fewer leaders are sharing this opinion now than the previous quarter. However, the employment is expected to be unchanged in the fourth quarter. It is the producers of capital goods and consumer goods who are optimistic regarding overall manufacturing for the next quarter, while the producers of intermediate goods are now only moderate positive.
Figure 4. General judgement of the outlook in next quarter for manufacturing
|Turning point value||Smoothed seasonally adjusted|
The industrial confidence indicator for the third quarter of 2019 was 2.5 (seasonally-adjusted net figures). The indicator is down from 5.1 in the last quarter. This is below the historical mean, which is calculated to 3.2. The indicator has not been below the historical mean since the second quarter of 2017.
The industrial confidence indicator has decreased mainly because the total stock of orders has flattened out in the third quarter and because of diminishing expected growth in production activity in the fourth quarter. A decrease for producer of intermediate goods was the main cause of the fall of the industrial confidence indicator, but also capital goods show a decrease.
Values above zero indicate that total output will grow in the forthcoming quarter, while values below zero indicate that total output will fall. International comparisons of the industrial confidence indicator are available from Eurostat (EU), The Swedish National Institute of Economic Research and Statistics Denmark.
1 Industrial confidence indicator is the arithmetic average of the answers (balances) to the questions on production expectations, total stock of orders and inventories of own products (the latter with inverted sign).
Figure 5. Industrial confidence indicator¹
|Seasonally adjusted||Average 1990-2019|
Lack of qualified labour still limiting production
The share of managers reporting that weak demand and strong competition were limiting factors for production was in the third quarter about at the same level as in the second quarter. At the same time, the numbers of leaders who report that a lack of qualified labour is a challenge in order to increase production further is at the same level as in the previous quarter. The numbers of leaders who report that a lack of qualified labor force is a challenge in order to increase production further is at a historical high level.
In figure 6 below shows how the indicators that represent resource shortage have increased since the bottom of 2016, while demand and competition represent a minor challenge for manufacturing
The average capacity utilisation for Norwegian manufacturing is at about the same level as in the previous quarter, and was calculated to 79.4 per cent at the end of the third quarter of 2019. This is below the historical average of 80.2 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).
Figure 7. Capacity utilisation in per cent for manufacturing
|Smoothed seasonally adjusted||Average 1990-2019|
The survey data was collected in the period from 5 September to 17 October 2019.