Business tendency survey for manufacturing, mining and quarrying, Q2 2003

According to the Business Tendency Survey the manufacturing industry experienced a further decline in output, capacity utilisation and employment throughout the second quarter of 2003. Weak demand in home and export markets constitutes a major problem, and total stock of orders continued to fall. An increase in the number of respondents that report of growth in export prices has to be seen in connection with a weakening of the Norwegian currency. Average capacity utilisation remained around 77 per cent, which is a very low figure.

About half of the respondents consider weak demand as a factor that limits production, while one fourth point at fierce competition. The fact that only 1 per cent of the managers mention supply of labour as a factor that limits production seems to confirm the negative development in the indicator covering average employment.

Improved conditions in the third quarter

For the first time since the first quarter of 2002 the optimists seem to be in majority concerning general outlooks for the manufacturing industry. This is supported by a rise in several indicators covering expected changes in the third quarter of 2003. Fierce competition and lack of demand, however, are still expected to be problematic.

Intermediate goods: Growth in export prices

Sectors producing intermediate goods (pulp, paper and paper products, chemical industry, basic metals and others) report of a stable development in output and capacity utilisation, but the average employment rate shows no signs of recovery. A significant increase in the number of respondents that report of growth in export prices causes this indicator to rise above 50 for the first time since the fourth quarter of 2000. Weak demand and fierce competition are still considered to be the main factors that limit production.

The indicator covering general judgement of the outlooks for the enterprise in the next quarter rose for the third consecutive quarter and is now above 50 per cent. An increase in the number of respondents that report of improved export prices support this result.

Capital goods: Lack of new orders

Sectors producing capital goods (metal products, machinery and equipment, offshore-related activity and others) are facing a serious downturn in total demand. Lack of new orders causes a decline in output, capacity utilisation and the average rate of employment. Average capacity utilisation has fallen to a very low level, but fewer report of an average capacity utilisation of less than 50 per cent. Compared with the second quarter of 2002 there is a 10 per cent increase in the number of respondents that mention competition as a factor that limits production.

General outlooks are considered to be poor, but an increasing number of respondents seem to be of the opposite opinion. The fact that total stock of orders is expected to stabilise supports this development. There are few signs of optimism in the medium run.

Consumer goods: Weak demand in export markets

Sectors producing consumer goods (food industry, publishing, pharmaceutical industry and others) report of stable development in output and capacity utilisation. Weak demand in export markets contributes to explain a possible decline in total stock of orders. Fewer respondents mention competition at the home market as a factor that limits production.

The indicator covering general judgement of the outlooks for the enterprise in the next quarter rose for the third consecutive quarter. This result is supported by growing expectations of a rise in output, capacity utilisation and export prices.