The business tendency survey for the 3rd quarter of 2022 still shows growth in total output, but the growth rate is lower than in the 2nd quarter. The producers of  and are experiencing an increase in production while the producers of report a decline in production for the first time since the 2nd quarter of 2020. There are still a high proportion of the industrial leaders who report that lack of access to skilled labor, raw materials and other input factors have limited production volume in the 3rd quarter (see figure 6). Lack of raw materials and input factors are still linked to logistics challenges in the world market, which this year have been reinforced by corona shutdowns in China, the war in Ukraine and the energy crisis in Europe.

Industrial leaders report growth in total industrial employment in the 3rd quarter of the year, but this growth is lower compared to the 2nd quarter. There is employment growth within all producer types, but the growth is weakest for producer of consumer goods.

Figure 1. Production and employment for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted

Reduction in new orders

Industrial leaders report a decline in new orders in the 3rd quarter from both the export and home markets. The decline is strongest for the producers of intermediate goods. A decline is also reported for the producers of consumer goods, while the producers of capital goods report increase in new order in both markets.

Reduced demand contributes to the fact that growth in the total stock of orders in manufacturing has stopped, and in the 3rd quarter it was unchanged compared to the previous quarter. For manufacturers of intermediate goods, a clear decrease in total stock of orders is reported, while for manufacturers of capital goods and consumer goods, growth is reported.

 

Figure 2. New orders received for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted

Industrial managers are reporting significant growth in the prices, both in domestic and export market for overall manufacturing in the 3rd quarter. Price growth is reported for all types of goods in both markets. For producers of consumer goods, the growth in prices is particularly strong. Producers of intermediate goods are largely export-oriented. The levels of the diffusion indexes for export and domestic prices are marginally lower than in the previous quarter, but they are still among the highest measured since this survey began in 1990.

Figure 3. Prices on products for manufacturing. Changes from previous quarter. Smoothed seasonally adjusted

A large proportion of industrial managers report continued growth in in the 3rd quarter. The level of the diffusion index for cost prices is the highest measured since the first survey in the fourth quarter of 2011. It is producers of consumer goods who have the highest growth in cost prices. Overall, stronger growth in cost prices than in product prices was reported. This substantiates that there are reports of declining in manufacturing, as a whole in the 3rd quarter. 

Pessimistic assessment of the 4th quarter

The general outlook for the 4th quarter of 2022 is negative. Only producers of capital goods show optimism, but this is lower than in the previous quarter. The producers of intermediate goods and consumer goods have a negative view of the coming quarter.

The industrial leaders expect zero growth in total production volume and a moderate increase in average employment in the 4th quarter compared to the 3rd quarter. Lower new orders from both the home and export markets and a decrease in the total stock of orders are expected. It is the producers of intermediate goods who report the weakest future prospects and they expect a decrease in production volume and new orders from both the home and export markets in the 4th quarter. Producers of consumer goods expect unchanged production and new orders from the domestic market, while they expect a moderate increase in new orders from the export market. The producers of capital goods show an increase in all these indicators. Producers of all types of goods also expect that the cost prices will increase further in the 4th quarter.

Figure 4. General judgement of the outlook in next quarter for manufacturing

Industry leaders report that investment plans are adjusted downwards somewhat for manufacturing. This indicator has not shown a decline since the 3rd quarter of 2020. In the survey of 3rd quarter of 2021, a new statistics table (see box at the bottom of the article) was introduced. This table shows the development in which factors the managers state as limiting the investments. In this quarter, there is a higher proportion of industrial leaders who state that the expected development in demand limits investments. The proportion of industrial leaders who believe that the are a limiting factor on investment is as large as in the previous quarter.

The industrial confidence indicator suggests a decline in the 4th quarter

in the 2nd quarter of 2022 was minus 4.4 ( ) which is a decrease from plus 2.3 from the previous quarter. The indicator is now below the historical average of 3.2 and thus indicates a decrease in the production in the 4th quarter.

The industrial confidence indicator indicates a strong decline for both the producers of intermediate goods and consumer goods, while it shows growth for the producers of investment goods.

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.

 

Figure 5. Industrial confidence indicator¹

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).

Demand and strong competition limit production

This quarter, there are a high proportion of industry leaders who highlight that weak demand and strong competition are factors that contributed to limiting production in the 3rd quarter of 2022. There is also still a high proportion of industry managers who point out that a lack of qualified labor and access to "raw materials and/or electricity" are factors that contributed to limiting production in the 3rd quarter, but the proportions are somewhat lower than in the previous quarter. is still high but is somewhat lower than it was in the previous survey.

 

Figure 6. Bottlenecks in production in current quarter. Smoothed seasonally adjusted
Figure 6. Bottlenecks in production in current quarter. Smoothed seasonally adjusted. Read more about the content in the description and source below the graph.

The figure shows that the proportion of industrial managers, who point out that a lack of qualified labor and access to raw materials and/or electricity are factors that contribute to limiting production, peaked in the 1st quarter of 2022, and has since decreased somewhat. At the same time, the figure shows that the proportion of industry leaders who point out that weak demand and strong competition have limited production reached a bottom in the 1st quarter, and has since risen somewhat.

Source: Business tendency survey for manufacturing, mining and quarrying

The average for Norwegian manufacturing was calculated to 80.6 per cent at the end of the 3rd quarter of 2022. This is marginally lower than at the end of the 2nd quarter, but it is still above the historical average of 80.0 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).

Figure 7. Capacity utilisation in per cent for manufacturing

Timelines

The survey data was collected in the period from 9 September to 18 October 2022.

As of this publication, new indicators are introduced in the statistics.

The indicator «Cost prices» and «Profitability» for actual and expected changes in the next quarter are published in the table «08264: Business tendency survey. Tendencies»

Cost prices measure the development in the prices that the company pays for the goods and services that are included in the production of the final item (raw material). As well as on the prices of the capital goods (production equipment and facilities used in the production process) that the company purchases or, in those cases where another part is responsible for the entire investment project, the price of the investment delivery.

Profitability measures the development in the profitability of the company's sales of goods or services. Profitability means the change in the difference between current operating expenses and current operating revenues. In this case, it is not considered factors that affect the company's profits that are not directly linked to the company's main activity (eg. sales of electricity).

In addition, a new statistics bank table is published which shows reasons that limit the company's investment activity: «12786: Business tendency survey. Limiting factors for investments».

For "Limiting factors for investments", business leaders are asked to choose the most important reasons that limit new investments (several answers possible). If they have not planned investments, they can use the option «No special».

The reasons that are measured are these:

«Access to credit» if they plan to invest in new real capital, but have problems establishing enough financing.

«Expected development in demand» if they expect lower demand and for that reason it is risky to invest in new capacity.

The alternatives for investment costs are used if it is considered that «Prices for Capital Good» and /or «Financing cost» are so high that it limits the implementation of planned investments.

«Governmental requirement» if they conclude that public requirements related to an investment (for example environmental requirements) are so high that planned investments are limited.

«Access to governmental subsidy» if the planned investments are limited by rejection of an application for public grants or that the grants are too low.

«Available production capacity» if at the end of the quarter they have spare production capacity and for that reason do not wish to carry out planned investments at the present time.

Companies that have other limiting factors than those specified in the form, use the option «Other factors» where the business leaders can specify what these factors are.