Grim prospects in manufacturing
Norwegian industrial managers report a further downturn in the total output in the last quarter of 2015. The continued weak trend among manufacturers of capital goods is driving the downturn. Expectations for the first quarter of 2016 are negative in large parts of manufacturing and suggest a further decline in the business cycle.
|4th quarter 2015|
|Changes from previous quarter||Expected changes in next quarter|
|1A diffusion index is compiled using the estimated percentages on "ups" and "same" according to the formula: (ups + 0,5 * same). The diffusion index has a turning point at 50. An index value above 50 indicates growth in the variable, and opposite for a value below 50.|
|Total volume of production||46.3||44.7|
|Average capacity utilisation||46.6||46.9|
|New orders received from home markets||43.4||46.6|
|New orders received from export markets||44.5||45.3|
|Total stock of orders||43.1||43.7|
|Prices on products at home markets||48.2||50.3|
|Prices on products at export markets||49.4||47.2|
The business tendency survey for the fourth quarter of 2015 shows a downturn in total production compared with the third quarter. However, the rate of decline remains mainly unchanged and the share of industrial managers who are negative to the development in production is about the same as in the previous survey. The manufacturers of capital goods experienced a decline in industrial production, thus pulling down manufacturing as a whole. Producers of intermediate goods and consumer goods reported about the same output as in the previous quarter. For the producers of capital goods the decline in this quarter is once again due to reduced activity among suppliers to the oil and gas sector, more specifically industries such as machinery and equipment, building of ships, boats and oil platforms, and repair and installation of machinery.
The overall employment declined in the fourth quarter of 2015. The decline comes from producers in all three main industrial groupings, but is most pronounced in capital goods where this indicator is at a historically low level. The low level applied to several industries in capital goods, but particularly building of ships, boats and oil platforms.
There was a decline in the overall stock of orders in the fourth quarter. New orders from both the domestic and export markets saw a clear fall, and this is a continuation of the negative trend we have seen since the third quarter of 2014. However, as in production, the rate of decline mainly remained unchanged within the industry as a whole. The fall in orders from manufacturers of capital goods accounted for the main decline in manufacturing, and this fall particularly affects the suppliers to the oil and gas sector, such as in building of ships, boats and oil platforms, machinery and equipment and repair and installation of machinery. The stock of orders for these manufacturers also saw a clear decrease in the fourth quarter. Producers of intermediate goods also had a slight decline in new orders as well as their overall stock of orders. The traditional export-oriented industry non-ferrous metals experienced increased orders from the export market, but a drop in prices. For manufacturers of consumer goods, the trend was somewhat different, with an increase in new orders and in the stock of orders.
Producers of intermediate goods and capital goods experienced a decline in prices in both the domestic and export market. Consumer goods, however, saw an increase in prices in both markets, particularly in the export market.
Pending decline in the first quarter of 2016
The general outlook for the first quarter of 2016 is clearly negative. Business leaders report that investment plans are adjusted downward. New orders and stocks of orders are expected to fall. The indicator of expected employment is also negative. Producers of investment goods are the most sceptical in relation to the first quarter, but manufacturers of intermediate goods are also pessimistic. Manufacturers of consumer goods are more optimistic, and expect an increase in production and the supply of new orders.
The industrial confidence indicator in the fourth1 quarter was -8.2 (seasonally-adjusted net figures), down from -7.6 in the previous quarter. This is below the historical average of 3.2. 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.
Declining capacity utilisation in manufacturing
Average capacity utilisation for Norwegian manufacturing was calculated to 76.5 per cent at the end of the fourth quarter of 2015. This is the lowest level recorded since the third quarter of 2009, and 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 4.2 in the fourth quarter of 2015. This is about the same level as the previous quarter, and above the historical average of 3.9 months. The indicator on resource shortage was also down in the fourth quarter due to an improvement in the labour supply shortage and fewer reporting full capacity utilisation.
The survey data was collected in the period from 10 December 2015 to 24 January 2016.
1 The word was corrected at 10:30 am on 28 January 2016.
Assessment of Q4 2015 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: -(+)
|Food, beverages and tobacco||+|
|Wood and wood products||+|
|Paper and paper products||+|
|Fabricated metal products||-|
|Computer and electrical equipment||-|
|Machinery and equipment||--|
|Ships, boats and oil platforms||--|
|Repair, installation of machinery||--|