Lower optimism in manufacturing for the next quarter

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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.

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
Q1-2010 50 50.02 44.54
Q2-2010 50 51.33 45.43
Q3-2010 50 52.03 47.00
Q4-2010 50 53.23 50.46
Q1-2011 50 55.35 53.88
Q2-2011 50 55.91 54.71
Q3-2011 50 55.06 54.23
Q4-2011 50 54.21 53.63
Q1-2012 50 53.21 53.63
Q2-2012 50 52.47 54.07
Q3-2012 50 52.04 54.27
Q4-2012 50 51.02 53.17
Q1-2013 50 49.75 52.29
Q2-2013 50 50.84 52.37
Q3-2013 50 52.68 51.59
Q4-2013 50 53.98 50.59
Q1-2014 50 54.44 49.96
Q2-2014 50 53.00 49.74
Q3-2014 50 51.33 49.89
Q4-2014 50 50.39 48.93
Q1-2015 50 48.11 45.06
Q2-2015 50 46.27 41.02
Q3-2015 50 46.82 39.12
Q4-2015 50 47.42 39.39
Q1-2016 50 48.52 41.04
Q2-2016 50 49.05 42.19
Q3-2016 50 47.38 42.08
Q4-2016 50 47.21 42.78
Q1-2017 50 49.22 45.03
Q2-2017 50 50.07 47.55
Q3-2017 50 50.48 49.84
Q4-2017 50 51.26 50.47
Q1-2018 50 52.26 50.19
Q2-2018 50 54.22 51.20
Q3-2018 50 55.36 52.75
Q4-2018 50 55.71 54.19
Q1-2019 50 55.10 55.05
Q2-2019 50 54.27 54.04
Q3-2019 50 54.94 52.39

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
Q1-2010 50 46.91 47.59
Q2-2010 50 50.78 51.68
Q3-2010 50 53.53 53.37
Q4-2010 50 55.36 54.25
Q1-2011 50 57.29 53.45
Q2-2011 50 56.91 50.59
Q3-2011 50 54.89 48.16
Q4-2011 50 55.02 47.26
Q1-2012 50 55.12 48.07
Q2-2012 50 52.57 48.85
Q3-2012 50 49.81 46.57
Q4-2012 50 49.08 44.63
Q1-2013 50 48.17 45.00
Q2-2013 50 48.87 47.97
Q3-2013 50 50.67 52.41
Q4-2013 50 50.75 54.97
Q1-2014 50 50.04 54.85
Q2-2014 50 49.89 53.02
Q3-2014 50 48.26 49.56
Q4-2014 50 46.27 46.16
Q1-2015 50 44.40 43.53
Q2-2015 50 43.18 42.18
Q3-2015 50 43.22 43.34
Q4-2015 50 44.30 44.08
Q1-2016 50 45.81 43.27
Q2-2016 50 46.90 42.71
Q3-2016 50 47.40 43.71
Q4-2016 50 49.07 45.83
Q1-2017 50 50.12 47.90
Q2-2017 50 50.00 49.44
Q3-2017 50 51.53 50.34
Q4-2017 50 53.58 51.93
Q1-2018 50 54.05 54.20
Q2-2018 50 54.13 55.66
Q3-2018 50 53.99 55.26
Q4-2018 50 53.99 53.80
Q1-2019 50 54.18 52.45
Q2-2019 50 53.53 51.23
Q3-2019 50 52.81 50.26

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
Q1-2010 50 46.72 45.52
Q2-2010 50 49.06 49.27
Q3-2010 50 51.36 51.55
Q4-2010 50 53.53 52.68
Q1-2011 50 55.80 52.84
Q2-2011 50 54.83 49.98
Q3-2011 50 52.59 46.55
Q4-2011 50 51.99 44.99
Q1-2012 50 51.87 45.55
Q2-2012 50 51.44 46.21
Q3-2012 50 51.90 45.44
Q4-2012 50 51.78 44.44
Q1-2013 50 51.09 45.04
Q2-2013 50 52.19 47.17
Q3-2013 50 53.13 50.00
Q4-2013 50 53.62 53.05
Q1-2014 50 54.38 53.30
Q2-2014 50 54.17 51.54
Q3-2014 50 53.37 50.80
Q4-2014 50 53.09 51.68
Q1-2015 50 51.07 50.57
Q2-2015 50 48.64 49.39
Q3-2015 50 48.19 49.74
Q4-2015 50 48.74 49.04
Q1-2016 50 49.61 47.88
Q2-2016 50 50.26 47.76
Q3-2016 50 49.97 47.86
Q4-2016 50 49.70 47.96
Q1-2017 50 50.34 49.63
Q2-2017 50 51.59 51.00
Q3-2017 50 53.21 52.26
Q4-2017 50 54.15 53.40
Q1-2018 50 55.43 55.23
Q2-2018 50 56.55 55.98
Q3-2018 50 56.74 55.16
Q4-2018 50 56.45 53.66
Q1-2019 50 55.70 52.25
Q2-2019 50 54.24 51.40
Q3-2019 50 53.43 51.20

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
Q1-2010 50 53.24
Q2-2010 50 56.05
Q3-2010 50 59.01
Q4-2010 50 61.00
Q1-2011 50 60.13
Q2-2011 50 57.55
Q3-2011 50 56.03
Q4-2011 50 56.04
Q1-2012 50 56.38
Q2-2012 50 56.20
Q3-2012 50 55.53
Q4-2012 50 55.12
Q1-2013 50 55.16
Q2-2013 50 55.01
Q3-2013 50 54.79
Q4-2013 50 54.69
Q1-2014 50 54.16
Q2-2014 50 53.39
Q3-2014 50 51.61
Q4-2014 50 48.49
Q1-2015 50 45.38
Q2-2015 50 43.51
Q3-2015 50 42.90
Q4-2015 50 44.16
Q1-2016 50 46.91
Q2-2016 50 50.51
Q3-2016 50 52.97
Q4-2016 50 53.66
Q1-2017 50 54.04
Q2-2017 50 55.01
Q3-2017 50 56.99
Q4-2017 50 58.91
Q1-2018 50 59.45
Q2-2018 50 58.91
Q3-2018 50 59.35
Q4-2018 50 59.29
Q1-2019 50 58.24
Q2-2019 50 56.52
Q3-2019 50 54.29

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
Q1-2010 3.2 3.2
Q2-2010 4.4 3.2
Q3-2010 8.9 3.2
Q4-2010 11.1 3.2
Q1-2011 9.1 3.2
Q2-2011 8.5 3.2
Q3-2011 5.7 3.2
Q4-2011 6.0 3.2
Q1-2012 9.0 3.2
Q2-2012 6.4 3.2
Q3-2012 0.8 3.2
Q4-2012 4.9 3.2
Q1-2013 1.4 3.2
Q2-2013 1.0 3.2
Q3-2013 6.3 3.2
Q4-2013 8.0 3.2
Q1-2014 6.5 3.2
Q2-2014 6.1 3.2
Q3-2014 1.9 3.2
Q4-2014 -1.7 3.2
Q1-2015 -3.6 3.2
Q2-2015 -9.3 3.2
Q3-2015 -6.4 3.2
Q4-2015 -8.2 3.2
Q1-2016 -6.7 3.2
Q2-2016 -3.0 3.2
Q3-2016 -3.5 3.2
Q4-2016 -0.5 3.2
Q1-2017 1.6 3.2
Q2-2017 2.5 3.2
Q3-2017 3.8 3.2
Q4-2017 6.4 3.2
Q1-2018 6.8 3.2
Q2-2018 8.9 3.2
Q3-2018 9.3 3.2
Q4-2018 8.8 3.2
Q1-2019 6.6 3.2
Q2-2019 5.1 3.2
Q3-2019 2.5 3.2

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

Figure 6

Figure 6. Bottlenecks in production in current quarter. Smoothed seasonally adjusted

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
Q1-2010 77.1 80.15
Q2-2010 77.8 80.15
Q3-2010 78.5 80.15
Q4-2010 78.9 80.15
Q1-2011 79.5 80.15
Q2-2011 79.8 80.15
Q3-2011 79.6 80.15
Q4-2011 79.6 80.15
Q1-2012 79.7 80.15
Q2-2012 79.7 80.15
Q3-2012 79.8 80.15
Q4-2012 79.8 80.15
Q1-2013 79.4 80.15
Q2-2013 79.3 80.15
Q3-2013 79.5 80.15
Q4-2013 80.0 80.15
Q1-2014 80.4 80.15
Q2-2014 80.5 80.15
Q3-2014 80.1 80.15
Q4-2014 79.3 80.15
Q1-2015 78.4 80.15
Q2-2015 77.3 80.15
Q3-2015 76.7 80.15
Q4-2015 76.9 80.15
Q1-2016 77.1 80.15
Q2-2016 77.2 80.15
Q3-2016 77.0 80.15
Q4-2016 76.9 80.15
Q1-2017 77.1 80.15
Q2-2017 77.6 80.15
Q3-2017 77.8 80.15
Q4-2017 77.8 80.15
Q1-2018 78.3 80.15
Q2-2018 78.8 80.15
Q3-2018 79.3 80.15
Q4-2018 79.5 80.15
Q1-2019 79.4 80.15
Q2-2019 79.3 80.15
Q3-2019 79.4 80.15

Timelines

The survey data was collected in the period from 5 September to 17 October 2019.

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