Broad optimism in manufacturing

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.

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. 

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. 

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. 

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.

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).

 

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.

 

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.

 

Timelines

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

 

More information:

Eurostat: Business survey – Confidence indicator by sector

Eurostat: Business survey – Capacity utilization

National Institute of Economic Research (Sweden) – Economic Tendency Survey

OECD: Main Economic Indicators