Broad optimism in manufacturing
Norwegian industrial managers report a production level increase and a rise in new orders in the third quarter of 2018. The general expectations for the fourth quarter of 2018 are also positive among most of the industry leaders.
The business tendency survey for the third quarter of 2018 shows an increase in total production compared with the second quarter of 2018. The growth is particularly strong among producers of intermediate goods, but also producers of capital goods and consumer goods report a production increase in the third quarter for 2018.
The overall employment in manufacturing went up in the third quarter of 2018. Producers of capital goods and intermediate goods reported employment growth, while producers of consumer goods reported a slight decrease.
Figure 1. Production and employment for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted
|Turning point value||Total volume of production||Average employment|
Order books are filling up
New orders from both domestic and export markets show an increase in the third quarter of 2018. The growth in new orders appears to exceed deliveries as the total stock of orders increased during this quarter. It is particularly producers of intermediate and capital goods that report growth in the total stocks of orders. Indications of growth in oil and gas investments on the Norwegian continental shelf in 2019 may explain the growth in total stocks of orders for producers of capital goods.
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|
Since the second quarter of 2017, price increases have been reported in both the home and export markets, and the trend continued in the third quarter with price growth in both markets for overall manufacturing. Producers of intermediate goods report a price increase in both markets, but the growth was weaker than in the previous quarter. Producers of capital goods, who have reported reduced prices in the export market since the first quarter of 2014, finally saw a price increase in both the home and export markets.
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|
Positive forecasts for the fourth quarter
The general outlook for the fourth quarter of 2018 is clearly positive for overall manufacturing, and the forecasts are more or less in line with the expectations that were given for the third quarter in the previous survey.
Industry leaders report that investment plans are adjusted upwards and employment is expected to increase further. New orders from both the home and export markets are also expected to increase further. The same is expected for the total stocks of orders.
Figure 4. General judgement of the outlook in next quarter for manufacturing
|Turning point value||Smoothed seasonally adjusted|
The industrial confidence indicator for the third quarter of 2018 was 8.9 (seasonally-adjusted net figures). It is unchanged compared with the previous quarter. This is the fifth consecutive quarter where the indicator is positive, and the indicator is well above the historical average. Values above zero indicate that total output will grow in the forthcoming quarter, 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.
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).
Figure 5. Industrial confidence indicator¹
|Seasonally adjusted||Average 1990-2018|
Capacity utilisation is increasing
The average capacity utilisation for Norwegian manufacturing shows an increase, and was calculated to 79.2 per cent at the end of the third quarter of 2018. The corresponding figure for the second quarter was 78.7 per cent. This is below the historical average of 80.2 per cent, but the average capacity utilisation has seen a clear increase since the fourth quarter of 2016. International comparisons of average capacity utilisation are available from Eurostat (EU).
Figure 6. Capacity utilisation in per cent for manufacturing
|Smoothed seasonally adjusted||Average 1990-2018|
The average number of working months covered by the current stock of orders was 4.1 in the third quarter of 2018. This is approximately the same value as the previous quarter, and above the historical average for the indicator.
Figure 7. Number of working months covered by current stock of orders for manufacturing
|Smoothed seasonally adjusted||Average 1990-2018|
The resource shortage indicator went up compared with the previous quarter. There is an increase in the number of leaders reporting that the lack of skilled labour was a limiting factor for production and an increase in the number of leaders reporting full capacity utilisation. At the same time, fewer business leaders reported that weak demand and strong competition are limiting factors for production in the third quarter of 2018 compared with the second quarter. Figure 8 below shows how the indicators that represent resource shortage have increased since the bottom of 2016, while demand and competition represent a minor challenge for manufacturing.
The survey data was collected in the period from 7 September to 16 October 2018.
Assessment of industries in Q2 2018 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||+|