High activity - sluggish demand

Manufacturing showed only small changes in output in the first quarter compared with the previous quarter, according to the business tendency survey for first quarter 1999. The activity level is high, but a decline in new orders and increasing competition is whittling down order reserves at current production levels in many industries. Industrial leaders do not expect to see significant changes in production, demand and prices in the second quarter.

Industrial leaders say production in the first quarter was basically unchanged from fourth quarter, about as expected. Growth, however, was noticeably slower than at the same time last year, with sectors of traditional export industries and offshore-related industries continuing to provide some buoyancy. There was little change in production and capacity utilization in the first quarter in intermediate goods-producing industries as a whole. Export industries such as basic chemicals and non-ferrous metals saw, however, an upturn throughout the quarter compared with the trend in past quarters. In capital goods-producing industries (machinery industry, platform industry etc.) activity is still high, with some softening seen in recent quarters. This group is experiencing sluggish demand, with shipbuilding-related firms particularly hard hit. No significant change is expected in manufacturing output in the second quarter.

Demand and competition
New orders in the first quarter were weaker than expected, inter alia because of greater competition in domestic and export markets. Incoming orders from the domestic market have been slowly declining in recent quarters, a trend which continued in the first quarter. An increasing percentage of firms say sluggish demand and/or increasing competition in the Norwegian market are limiting output. In the first quarter, 46 per cent of companies reported such limitations, compared with 43 per cent in the fourth quarter. Just about every other firm expects to encounter such problems in the second quarter. New export orders were also weaker than expected.

First quarter utilization of manufacturing capacity was about 82 per cent, the same level as in the previous quarter, although somewhat lower than at the same time last year. Development on the demand side in combination with greater competition from imports have dampened capacity problems somewhat. Seven per cent of firms said they had capacity problems compared with 10 per cent at the same time last year. The percentage citing labour shortages as a limiting factor fell to four per cent in first quarter after remaining relatively stable at abut 10-11 per cent for a long time. Labour shortages are still the most widespread in sectors of the engineering industry.

New Statistics
Business tendency survey, 1st quarter 1999.
The statistics are published quarterly in the Weekly Bulletin of Statistics. For more information contact: Tom.Langer.Andersen@ssb.no, tel. +47 21 09 47 29.

Weekly Bulletin issue no. 18, 1999