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Signs of optimism in manufacturing

In the first quarter of 2017, Norwegian industrial managers reported a levelling off of the decline in production. Suppliers to the oil and gas sector in particular reported a decline. The general expectations for the second quarter of 2017 are positive among most of the industry leaders, according to the statistics Business tendency survey for manufacturing, mining and quarrying.

The business tendency survey for the first quarter of 2017 shows that the downturn in total production has levelled off compared with the fourth quarter of 2016. For manufacturers of capital goods, there was a further decline in production due to the low activity among suppliers to the oil and gas sector. This is particularly affecting industries such as machinery and equipment, and building of ships and oil platforms.

Producers of intermediate goods reported a growth in production in the last quarter. There was an increase in industries such as wood and wood products and basic chemicals. At the same time there was increased production within consumer goods, especially for manufacturers of food products. The decline in production of capital goods was offset by the increase in the other industrial groupings, leading to a levelling off of the total industrial production. This is the first time since the first quarter of 2015 that the overall production trend has not been negative.

The overall employment declined in the first quarter of 2017. The decline stems from capital goods and consumer goods, while intermediate goods show an increase. The fall in employment was most significant among producers of capital goods, which are particularly affected by the reduced investment activity in the oil and gas sector. 

Figure 1. Production and employment for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
Figure 1. Production and employment for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
Turning point value Total volume of production Average employment
Q12008 50 56.44 54.20
Q22008 50 53.67 51.35
Q32008 50 47.83 46.42
Q42008 50 40.96 40.33
Q12009 50 37.62 36.18
Q22009 50 39.78 36.65
Q32009 50 44.58 39.40
Q42009 50 47.89 42.41
Q12010 50 50.02 44.54
Q22010 50 51.33 45.43
Q32010 50 52.02 46.99
Q42010 50 53.24 50.46
Q12011 50 55.35 53.88
Q22011 50 55.91 54.71
Q32011 50 55.06 54.23
Q42011 50 54.18 53.64
Q12012 50 53.19 53.63
Q22012 50 52.48 54.06
Q32012 50 52.06 54.28
Q42012 50 51.00 53.17
Q12013 50 49.74 52.26
Q22013 50 50.87 52.35
Q32013 50 52.67 51.61
Q42013 50 53.95 50.62
Q12014 50 54.43 49.97
Q22014 50 53.05 49.77
Q32014 50 51.33 49.99
Q42014 50 50.36 49.02
Q12015 50 48.07 45.01
Q22015 50 46.36 40.96
Q32015 50 46.83 39.17
Q42015 50 47.50 39.48
Q12016 50 48.13 40.96
Q22016 50 48.45 42.09
Q32016 50 47.44 42.23
Q42016 50 47.75 43.10
Q12017 50 50.04 45.48

Improvement for the domestic market

There was a decline in the total stock of orders in the first quarter. New orders from the domestic market increased for the first time since the first quarter of 2014. In the export market, the number of new orders fell. Producers of capital goods saw a decline in new orders from both markets, and in the stock of orders. For manufacturers of intermediate goods there was an increase in new orders from both markets and an increase in the stock of orders. Manufacturers of consumer goods also saw an increase in new orders from both markets and in the stock of orders.

Figure 2. New orders received for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
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
Q12008 50 52.80 50.10
Q22008 50 49.38 46.48
Q32008 50 42.58 42.72
Q42008 50 34.48 28.81
Q12009 50 32.46 28.00
Q22009 50 37.37 38.02
Q32009 50 42.34 41.09
Q42009 50 44.47 43.87
Q12010 50 46.94 47.57
Q22010 50 50.77 51.80
Q32010 50 53.47 53.43
Q42010 50 55.41 54.17
Q12011 50 57.37 53.08
Q22011 50 56.90 50.06
Q32011 50 54.83 47.87
Q42011 50 54.92 47.22
Q12012 50 54.86 48.01
Q22012 50 52.32 48.86
Q32012 50 49.76 46.56
Q42012 50 49.28 44.63
Q12013 50 48.33 45.05
Q22013 50 48.78 47.97
Q32013 50 50.50 52.37
Q42013 50 50.94 54.89
Q12014 50 50.20 54.80
Q22014 50 49.74 53.10
Q32014 50 48.19 49.63
Q42014 50 45.96 46.07
Q12015 50 43.69 43.46
Q22015 50 42.66 42.30
Q32015 50 43.23 43.39
Q42015 50 44.55 43.94
Q12016 50 46.02 43.50
Q22016 50 46.65 43.31
Q32016 50 47.16 43.91
Q42016 50 49.17 45.59
Q12017 50 51.38 47.57

Overall, prices were slightly down for the export market, while remaining almost unchanged for the domestic market. For producers of capital goods, there was a decline in prices in both markets, while producers of intermediate goods and consumers goods had an increase in both markets.

Figure 3. Prices on products for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
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
Q12008 50 61.95 54.05
Q22008 50 60.85 54.97
Q32008 50 56.22 54.45
Q42008 50 50.09 50.29
Q12009 50 44.77 45.16
Q22009 50 44.35 43.94
Q32009 50 46.02 44.06
Q42009 50 46.22 43.85
Q12010 50 46.72 45.53
Q22010 50 49.05 49.27
Q32010 50 51.35 51.54
Q42010 50 53.53 52.67
Q12011 50 55.82 52.85
Q22011 50 54.85 50.00
Q32011 50 52.63 46.55
Q42011 50 52.03 44.95
Q12012 50 51.90 45.57
Q22012 50 51.41 46.26
Q32012 50 51.87 45.43
Q42012 50 51.80 44.34
Q12013 50 51.15 45.09
Q22013 50 52.13 47.27
Q32013 50 53.10 49.98
Q42013 50 53.65 52.84
Q12014 50 54.42 53.32
Q22014 50 54.27 51.93
Q32014 50 53.51 51.22
Q42014 50 53.03 51.73
Q12015 50 50.97 50.14
Q22015 50 48.79 48.70
Q32015 50 48.21 49.25
Q42015 50 48.41 48.67
Q12016 50 49.44 47.98
Q22016 50 50.26 48.14
Q32016 50 49.97 47.87
Q42016 50 49.80 47.66
Q12017 50 50.02 48.54

Positive expectations for the second quarter of 2017

The general outlook for the second quarter of 2017 is positive. Business leaders report that investment plans have been adjusted upwards slightly and that employment will see a further drop. New orders from both the domestic market and export market are expected to increase. The total stock of orders is expected to see a slight increase. Producers of intermediate goods and consumer goods are optimistic about the second quarter, while manufacturers of capital goods have an almost unchanged view on the matter.

Figure 4. General judgement of the outlook in next quarter for manufacturing.
Figure 4. General judgement of the outlook in next quarter for manufacturing.
Turning point value General judgement of the outlook
Q12008 50 56.98
Q22008 50 52.38
Q32008 50 45.47
Q42008 50 40.34
Q12009 50 40.17
Q22009 50 43.98
Q32009 50 47.54
Q42009 50 50.26
Q12010 50 53.24
Q22010 50 56.05
Q32010 50 59.01
Q42010 50 61.00
Q12011 50 60.13
Q22011 50 57.55
Q32011 50 56.03
Q42011 50 56.04
Q12012 50 56.38
Q22012 50 56.19
Q32012 50 55.53
Q42012 50 55.13
Q12013 50 55.16
Q22013 50 55.00
Q32013 50 54.79
Q42013 50 54.70
Q12014 50 54.18
Q22014 50 53.33
Q32014 50 51.59
Q42014 50 48.55
Q12015 50 45.46
Q22015 50 43.37
Q32015 50 42.89
Q42015 50 44.28
Q12016 50 47.06
Q22016 50 50.30
Q32016 50 52.75
Q42016 50 53.31
Q12017 50 52.58

The industrial confidence indicator in the first quarter was 1.1 (seasonally-adjusted net figures), up from -0.2 in the previous quarter. This is the first time since the third quarter of 2014 that this indicator has been positive, but it is still below the historical average of 3.0. Values above zero indicate that total output will grow, 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.

Figure 5. Industrial confidence indicator¹
Figure 5. Industrial confidence indicator¹
Seasonally adjusted Average 1990-2017
Q12008 6.9 3.0
Q22008 -0.7 3.0
Q32008 -6.9 3.0
Q42008 -22.9 3.0
Q12009 -19.3 3.0
Q22009 -7.9 3.0
Q32009 -2.9 3.0
Q42009 0.1 3.0
Q12010 3.2 3.0
Q22010 4.5 3.0
Q32010 8.9 3.0
Q42010 11.1 3.0
Q12011 9.1 3.0
Q22011 8.6 3.0
Q32011 5.7 3.0
Q42011 5.9 3.0
Q12012 9.0 3.0
Q22012 6.6 3.0
Q32012 0.7 3.0
Q42012 4.7 3.0
Q12013 1.3 3.0
Q22013 1.5 3.0
Q32013 6.0 3.0
Q42013 7.8 3.0
Q12014 6.4 3.0
Q22014 6.9 3.0
Q32014 1.2 3.0
Q42014 -1.8 3.0
Q12015 -3.9 3.0
Q22015 -8.0 3.0
Q32015 -7.5 3.0
Q42015 -8.1 3.0
Q12016 -7.0 3.0
Q22016 -1.4 3.0
Q32016 -5.1 3.0
Q42016 -0.2 3.0
Q12017 1.1 3.0
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).

Decrease in capacity utilisation

The average capacity utilisation for Norwegian manufacturing had a marginal decrease and was calculated to 76.6 per cent at the end of the first quarter of 2017, compared with 76.9 in the fourth quarter of 2016. This is below the historical average of 80.3 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).

Figure 6. Capacity utilisation in per cent for manufacturing
Figure 6. Capacity utilisation in per cent for manufacturing
Smoothed seasonally adjusted Average 1990-2017
Q12008 83.66 80.27
Q22008 82.98 80.27
Q32008 81.37 80.27
Q42008 78.90 80.27
Q12009 76.83 80.27
Q22009 76.04 80.27
Q32009 76.35 80.27
Q42009 76.83 80.27
Q12010 77.09 80.27
Q22010 77.75 80.27
Q32010 78.48 80.27
Q42010 78.93 80.27
Q12011 79.45 80.27
Q22011 79.76 80.27
Q32011 79.56 80.27
Q42011 79.57 80.27
Q12012 79.69 80.27
Q22012 79.67 80.27
Q32012 79.78 80.27
Q42012 79.79 80.27
Q12013 79.43 80.27
Q22013 79.27 80.27
Q32013 79.54 80.27
Q42013 79.96 80.27
Q12014 80.41 80.27
Q22014 80.49 80.27
Q32014 80.07 80.27
Q42014 79.30 80.27
Q12015 78.41 80.27
Q22015 77.40 80.27
Q32015 76.75 80.27
Q42015 76.78 80.27
Q12016 77.08 80.27
Q22016 77.23 80.27
Q32016 77.09 80.27
Q42016 76.86 80.27
Q12017 76.73 80.27

The average number of working months covered by the current stock of orders was 4.1 in the first quarter of 2017. This is around the same level as the previous quarter, and above the historical average for the indicator of 3.9.

Figure 7. Number of working months covered by current stock of orders for manufacturing
Figure 7. Number of working months covered by current stock of orders for manufacturing
Smoothed seasonally adjusted Average 1990-2017
Q12008 4.83 3.9
Q22008 4.78 3.9
Q32008 4.65 3.9
Q42008 4.46 3.9
Q12009 4.23 3.9
Q22009 3.97 3.9
Q32009 3.77 3.9
Q42009 3.74 3.9
Q12010 3.83 3.9
Q22010 3.95 3.9
Q32010 4.12 3.9
Q42010 4.25 3.9
Q12011 4.31 3.9
Q22011 4.37 3.9
Q32011 4.34 3.9
Q42011 4.13 3.9
Q12012 4.00 3.9
Q22012 4.09 3.9
Q32012 4.26 3.9
Q42012 4.32 3.9
Q12013 4.29 3.9
Q22013 4.20 3.9
Q32013 4.15 3.9
Q42013 4.26 3.9
Q12014 4.45 3.9
Q22014 4.51 3.9
Q32014 4.42 3.9
Q42014 4.35 3.9
Q12015 4.28 3.9
Q22015 4.25 3.9
Q32015 4.23 3.9
Q42015 4.17 3.9
Q12016 4.05 3.9
Q22016 3.95 3.9
Q32016 3.94 3.9
Q42016 3.98 3.9
Q12017 4.03 3.9

The resource shortage indicator remains at the same level as the previous quarter. There is still little shortage of labour, good access to raw materials and electrical power, and few industry leaders are reporting full capacity utilisation.

Figure 8

Figure 8. Bottlenecks in production in current quarter. Smoothed seasonally adjusted

Timeliness

The survey data was collected in the period from 9 March 2017 to 19 April 2017. 

 

Assessment of Q1 2017 and the short-term outlook¹

1 An overall evaluation of the present situation and expected short-term developments.

2 Very good: ++, Good: +, Stable: ~, Poor: -, Very poor: --, Good, but with certain negative indications: +(-), A situation where the + and - factors even out: +/-, Poor, but with certain positive indications: -(+)

Industry Evaluation 2
Food, beverages and tobacco +
Wood and wood products ++
Paper and paper products +
Basic chemicals +
Non-ferrous metals +
Fabricated metal products +(-)
Computer and electrical equipment -(+)
Machinery and equipment --
Ships, boats and oil platforms --
Repair, installation of machinery -