Still optimism in manufacturing

The business tendency survey for the fourth quarter of 2018 shows almost an unchanged level of production compared with the fourth quarter of 2017. Manufacturers of capital goods and consumer goods report that production was roughly unchanged, while producers of intermediate goods report lower production in the first quarter of 2018.

The fall in the overall employment, which started in 2015, has slowed down and was reported in the first quarter of 2018 to be at the same level as the previous quarter. There was an increase in employment for producers of intermediate goods but a decrease for producers of consumer goods and capital goods.   

Figure 1. Production and employment for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted

	Turning point value	Total volume of production	Average employment
Q1-2009	50	37.6	36.2
Q2-2009	50	39.8	36.6
Q3-2009	50	44.6	39.4
Q4-2009	50	47.9	42.4
Q1-2010	50	50.0	44.5
Q2-2010	50	51.3	45.4
Q3-2010	50	52.0	47.0
Q4-2010	50	53.2	50.5
Q1-2011	50	55.4	53.9
Q2-2011	50	55.9	54.7
Q3-2011	50	55.1	54.2
Q4-2011	50	54.1	53.6
Q1-2012	50	53.1	53.6
Q2-2012	50	52.4	54.1
Q3-2012	50	52.0	54.3
Q4-2012	50	51.0	53.1
Q1-2013	50	49.8	52.3
Q2-2013	50	50.9	52.4
Q3-2013	50	52.6	51.6
Q4-2013	50	53.9	50.6
Q1-2014	50	54.5	50.0
Q2-2014	50	53.1	49.7
Q3-2014	50	51.2	49.9
Q4-2014	50	50.3	49.0
Q1-2015	50	48.2	45.1
Q2-2015	50	46.5	41.0
Q3-2015	50	46.6	39.1
Q4-2015	50	47.4	39.4
Q1-2016	50	48.5	41.1
Q2-2016	50	48.9	42.2
Q3-2016	50	47.5	42.1
Q4-2016	50	47.2	42.8
Q1-2017	50	48.4	44.9
Q2-2017	50	49.5	47.4
Q3-2017	50	50.6	49.7
Q4-2017	50	50.5	50.5
Q1-2018	50	49.5	50.2

Increase in new orders from the export market

New orders from the export market show an increase in the first quarter of 2018. New orders from the domestic market and the total stock of orders also show an increase during this period. Looking at the different industrial groupings, the producers of intermediate goods and capital goods show an increase in new orders both from the domestic and the export market. For producers of consumer goods, there was an increase in new orders from the export market, while new orders from the domestic market show a decrease compared with the fourth quarter of 2017.

Prices went up for both export and domestic markets for the manufacturing industry in the first quarter. Producers of intermediate goods and consumer goods saw an increase in prices in both markets. Underlying factors for the rise in prices for these industrial groupings were increased prices on basic metals and food products. For producers of capital goods, there was still a negative trend in prices in both markets. The requirement for oil companies to reduce development and maintenance costs, and fierce competition among suppliers to the oil and gas industry are still likely explanations for the downturn in prices for this grouping.

Strong belief in a better second quarter in 2018

The general outlook for the second quarter of 2018 is clearly positive. Industry leaders report that investment plans are adjusted upwards and employment is expected to increase. They expect new orders from both the domestic market and export market to increase. The total stock of orders is also expected to rise. Producers of capital goods, intermediate goods and consumer goods are all optimistic in their assessment about the second quarter of 2018.

The industrial confidence indicator for the first quarter of 2018 was 6.3 (seasonally-adjusted net figures), which is about the same level as in the previous quarter. This is the fifth consecutive quarter where the indicator is positive and the indicator is well above the historical average. 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.

Capacity utilisation still below the historical average

The average capacity utilisation for Norwegian manufacturing shows the same level as in the previous quarter and was calculated to 77.9 per cent at the end of the first quarter of 2018. This is below the historical average of 80.2 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).

The average number of working months covered by the current stock of orders was 4.2 in the first quarter of 2018. This is slightly higher than the previous quarter, and above the historical average for the indicator.

The resource shortage indicator went slightly up compared with the previous quarter. There is a slight increase in the number of leaders reporting that the lack of skilled labour was a limiting factor for production and a slight increase in those reporting full capacity utilisation. At the same time, fewer business leaders report that weak demand or strong competition are limiting factors for production for the first quarter of 2018.

Timelines

The survey data was collected in the period from 8 March to 17 April 2018.

Assessment of Q1 2018 and the short-term outlook¹

 

More information:

Eurostat: Business survey – Confidence indicator by sector

Eurostat: Business survey – Capacity utilization

National Institute of Economic Research (Sweden) – Economic Tendency Survey

OECD: Main Economic Indicators