Business tendency survey for manufacturing, mining and quarrying, Q2 2016

The business tendency survey for the second quarter of 2016 shows a flattening in total production compared with the first quarter of 2016. This comes after a fall in the previous five quarters. Manufacturers of capital goods had lower production, where low activity among suppliers to the oil and gas sector continues to contribute to the decline. This particularly affects industries such as:

• Machinery and equipment
• Building of ships, boats and oil platforms
• Repair and installation of machinery

The number of industry leaders who are negative to the development in production was however about the same or slightly lower than in the previous quarter in the aforementioned industries. Producers of intermediate goods reported increased production in the last quarter. Here there was an increase in industries such as:

• Wood and wood products
• Basic metals
• Paper and paper products

Manufacturers of chemicals had on the other hand a lower production than in the previous quarter. At the same time, increased production can be seen within  consumer goods, especially for manufacturers of food. The increased production in intermediate goods and consumer goods contributes to the flattening of total production.

The overall employment declined in the second quarter of 2016. The decline comes from producers in all three main industrial groupings. The fall is most significant among producers of capital goods that are particularly connected to the oil and gas sector. However, the rate of the overall decline in employment has not increased compared with the previous quarter.

Decline in new orders and decline in the total stock of orders

There was a decline in the total stock of orders in the second quarter. New orders from both the domestic and export markets saw a fall from the pervious quarter. Producers of investment goods saw a clear decline in new orders and the stock of orders, which particularly affects suppliers to the oil and gas sector. Producers of intermediate goods saw a slight decline in orders from the export market, while the home market experienced a small increase, and the stock of orders was unchanged. Producers of consumer goods experienced an increase in orders from both the domestic and export market, and an increased stock of orders.

Prices declined in both the domestic and export market for manufacturers of capital goods. For manufacturers of intermediate goods the prices in the domestic market went slightly up, while declining in the export market. For consumer goods there was a notable increase in prices in both markets, especially in food products.

Different expectations for the third quarter of 2016

The general outlook for the third quarter of 2016 is negative, which has been the case for seven consecutive quarters. However, in this quarter, fewer business leaders have a negative view of the next quarter than was the case in the previous quarter. Business leaders report that investment plans are adjusted downwards. The supply of new orders and the stock of orders are expected fall, and employment will see a further drop. The manufacturers of the various types of goods have different expectations for the next quarter. Producers of capital goods are in general negative in their expectations for the third quarter, while manufacturers of intermediate goods and consumer goods are optimistic about the coming quarter.

The industrial confidence indicator in the second quarter was at -2.0 (seasonally-adjusted net figures), up from -6.6 in the previous quarter. This is below the historical average of 3.1. 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.

Marginal increase in capacity utilisation in manufacturing

Average capacity utilisation for Norwegian manufacturing had a marginal increase and was calculated to 77.2 per cent at the end of the second quarter of 2016, compared with 77.0 in the first quarter of 2016. This is below the historical average of 80.4 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 in the second quarter of 2016. This is below the level in the previous quarter, but above the historical average of 3.9 months. The indicator on resource shortage is slightly up from 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.

Timeliness

The survey data was collected in the period from 9 June 2016 to 27 July 2016.

Assessment of Q2 2016 and the short-term outlook¹