Still shortage and price growth in manufacturing

The business tendency survey for the 1st quarter of 2022 still shows growth in total output. The growth rate is now higher than in the 4th quarter of 2021. The producers of

capital goods

Covers industries such as machinery and equipment, ships, boats and oil platforms, repair and installation. Often referred to as the engineering industry.

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and

intermediate goods

Covers industries such as wood and wood products, paper and paper products, basic chemicals and basic metals. Often referred to as traditional export industries

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are experiencing a clear increase in production while the growth among producers of

consumer goods

Covers industries such as food products and beverages, printing and reproduction, pharmaceuticals and furniture

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is somehow more moderate. There are still some 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 1st quarter (see figure 6). Lack of raw materials and input factors are still linked to logistics challenges in the world market, this is a problem that has been exacerbated by the war in Ukraine.

Industrial leaders report growth in total industrial employment in the 1st quarter compared with the 4th quarter of 2021, and employment growth is solid in all types of goods, but the growth is higher for producers of capital goods.

Sustained strong growth in both product and cost prices

The total stock of orders in manufacturing shows a clear growth in the 1st quarter. Growth in stock of orders are reported by producers of all types of goods. The industrial leaders also report clear growth in new orders for both domestic and export market.

Industrial managers are reporting significant growth in the prices, both in domestic and export market for overall manufacturing in the 1st quarter. Price growth is reported for all types of goods in both markets. For producers of intermediate 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 the highest measured since this survey began in 1990.

A large proportion of industrial managers report increasing growth in

cost prices

the development in the prices that the company pays for the goods and services that are included in the production (product input), and on the prices of production equipment and facilities used in the production process.

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in the 1st quarter. The level of the diffusion index for input 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 input prices. Overall, stronger growth in cost prices than in product prices was reported. This substantiates that there are reports of declining

profitability

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.

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in manufacturing, as a whole in the 1st quarter (see box at the bottom of the article).

Positive expectations for the second quarter of 2022

The general outlook for the 2nd quarter of 2022 is clearly positive. The proportion with an optimistic view for the coming quarter is slightly higher than in the previous survey. Although producers of all goods types have positive expectations, it is producers of capital goods who have the most optimistic view related to the coming quarter. The industrial managers further report that the total production volume is expected to grow during the 2nd quarter compared with the 1st quarter of 2022. Employment growth is also expected in the coming quarter. It is reported that new orders from both the domestic and export markets will increase, and further growth in the total stock order is also expected. The strength of the expected growth for the various indicators is not the same for the different good types. Generally, the strongest growth is expected for producers of capital goods, while the expected growth is somehow weaker for producers of and intermediate and consumer goods. Producers of all product types also expect that prices for both intermediate goods and products for sale will increase further in the second quarter.

Industry leaders reported that adopted investment plans are marginally adjusted upwards for manufacturing and the growth rate is the same as in the 4th quarter. 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 recent quarters, a lower proportion of industrial managers state that expected developments in demand limit the investments. At the same time, an increasing proportion of industrial managers state that the

Prices of investment goods

The prices of the investment goods (production equipment and facilities used in the production process) that the company purchases are so high that it limits the implementation of planned investments.

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constitute a limiting factor in the investments.

The industrial confidence indicator indicates further growth

The industrial confidence indicator

This is the average of the responses (balances) to the questions on expected volume of production, total stock of orders and inventories of own products for sale (the latter with an inverted sign). See Definitions in ‘About the statistics’ for further details.

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in the 1st quarter was 8,8 (

seasonally-adjusted

Figures that are adjusted for calendar effects and seasonal variation. Such adjustment gives a more accurate picture of the underlying trend in the time series and makes it easier to compare the results of subsequent quarters.

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) which is marginally higher than in the previous quarter. The indicator is still well above the historical average of 3.2 and this indicates growth in production volume for the 2nd quarter of 2022.

The level of the industrial confidence indicator for the various types of goods is relatively similar, but the outlook for growth is clearest for the producer of capital 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.

Access to raw materials limits production

Compared with the previous survey, there are a higher proportion of industry leaders who highlight that the lack of qualified labor and supply of raw materials and/or electric power are factors that contributed to limiting production in the 1st quarter of 2022. At the same time, a lower proportion of industry leaders point out that weak demand and strong competition have limited production.

Resource shortage

The sum of percentages for those who have reported that lack of qualified labour and raw materials/electric power limits production, plus the percentage of establishments with capacity utilisation above 95 per cent.

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indicator continue to rise and it is now at its highest level since the 2nd quarter of 2008.

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Description and source

The figure shows that in recent quarters there has been an increasing proportion of industrial leaders who point out that the lack of qualified labor and access to raw materials and / or electric power are factors that contribute to limiting production. At the same time, in the same period, there has been an ever lower proportion of industrial leaders who point out that weak demand and strong competition have limited production.

Source: Business tendency survey for manufacturing, mining and quarrying

The average

capacity utilisation

How much of the available production capacity is utilised. A high capacity utilisation means that it is difficult to produce more without investing, while a low capacity utilisation means having capacity that is not being used.

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for Norwegian manufacturing was calculated to 81.5 per cent at the end of the 1st quarter of 2022. The utilization rate is higher than it was at the end of the 4th quarter of 2021, and it is above the historical average of 80.0 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).

Timelines

The survey data was collected in the period from 8 March to 19 April 2022.