| Interview round: |
5-2006 |
| Interview period: |
October and November 2006 |
Summary
Demand, output and the market outlook
All industries report continued solid growth. Growth in this round is the strongest that has been registered so far in the regional network. The entire country and most industries are experiencing an upturn. The market outlook remains positive, but all industries are expecting somewhat slower growth in the period ahead. An important reason for this is capacity shortages.
In domestically oriented manufacturing and the export industry, growth remains solid. Growth is higher now than in the previous round. Growth is particularly solid in building-related manufacturing, as well as maritime and oil-related industry. Within the export industry, there are reports of strong growth in the engineering industry, shipbuilding, fish farming and furniture manufacturing. Suppliers to the petroleum industry report continued strong growth, although the peak has probably been reached. Building and construction report solid growth, but growth has slowed in the last few rounds. Labour shortages seem to be curbing growth in this industry. Growth remains solid in retail trade and the service sector. Developments are particularly strong in commercial services.
Capacity utilisation and investment
66% of our contacts now report that they would have some or considerable difficulties in accommodating an increase in demand, compared with around 59% in the previous round. Capacity constraints are still most pressing in the building and construction sector. The share of companies that would have some or considerable difficulties in accommodating an increase in demand has increased markedly in manufacturing and the service sector in this round. This is primarily because labour shortages have become more acute.
All industries report a moderate to solid investment rate, as in the previous rounds. This must be seen in the context of growth, expectations of continued growth and capacity constraints. It appears that investment is increasing most in the service sector and the local government and hospital sectors.
Employment and the labour market
There is solid growth in employment. Employment growth in this round is the strongest that has been registered so far in the regional network. Building and construction and service industries report the strongest growth. Employment growth is expected to be somewhat lower in the period ahead, partly because many companies are concerned about recruitment and partly because many companies have already increased employment substantially.
The labour market is tightening. 56% of our contracts, compared with 47% in the previous round, report that labour shortages will be a constraint to output/turnover in the event of increased demand. Labour shortages are most pronounced in building and construction although this problem seems to be growing in other industries. In the spring, labour shortages were most acute in Region North-West and South-West. In this round, we have registered a dwindling labour supply throughout the country. Engineers in particular are in short supply, in both manufacturing and building and construction. There is also a shortage of project managers, craftsmen, carpenters, mechanics, drivers, economists and architects. Efforts to solve this problem include increased use of resources on training, increased use of foreign labour and higher wages to attract/retain labour.
Costs, prices and profitability
Annual wage growth is accelerating. Expected annual wage growth is 4¾% compared with 4½ % in the previous round. Wage growth is highest in building and construction and the service sector. Our contacts indicate that they expect annual wage growth to be higher in 2007.
Prices overall have risen more rapidly than in the previous round. The rise in prices has gathered pace throughout the year. In this round, price increases are the highest ever registered in the regional network. Prices have increased most in building and construction, manufacturing and corporate services. A majority of companies are expecting prices to rise at a faster pace in the period ahead in all industries except the household service sector. Building and construction is the industry where most contacts are expecting prices to rise at a faster pace.
The entire private sector reports solid growth in profitability. The overall growth rate is approximately the same as in the previous round. Suppliers to the petroleum sector report the most pronounced improvement in profitability, although commercial services also report solid profitability growth during the period.