| Interview round: |
4-2006 |
| Interview period: |
August 2006 |
Summary
Demand, output and the market outlook
All industries report solid growth in demand and output during the period. Suppliers to the petroleum industry report particularly strong growth. The growth rate in this sector has slackened somewhat compared with the previous period since the industry is already operating at full capacity. The portion of domestic manufacturing that is oriented towards building and construction, the petroleum sector and the fish farming industry report solid growth. Within the export industry, there are reports of strong growth in the shipbuilding and ship equipment industry, furniture industry and fish farming. Once again, suppliers to the petroleum industry report the strongest growth of all industries in this round. This is a result of high oil prices and record-high investment in the petroleum sector. Building and construction report solid growth in all regions of the country. In Regions North-West and South-West, a large portion of construction activity is still linked to petroleum activity. In service industries, and particularly in corporate services, overall growth is solid. In the retail trade sector, growth is strongest for building materials, electrical goods and luxury goods and more moderate for clothing and cars.
On the whole, the market outlook is positive and growth is expected to remain at the same level. Again, suppliers to the petroleum industry expect the strongest growth. Growth is expected to slow, due in part to a lack of idle capacity.
Capacity utilisation and investment
59% of the companies report that they would have some or considerable problems in accommodating an increase in demand, compared with 53% in the previous round. Building and construction and some manufacturing sectors report the most pronounced capacity problems. Labour shortages are the primary constraint.
Investment is increasing in all industries, in pace with increased activity. Manufacturing, corporate services and the local government and hospital sectors are expecting the strongest investment growth. Both manufacturing and service industries are investing in increased capacity.
Employment and the labour market
The high activity level has contributed to a marked increase 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 in employment. The increase is more moderate in the local government and hospital sectors. A large portion of the strong employment growth, particularly in Western Norway, must be attributed to the high activity level in and relating to petroleum activities. It appears that the positive developments in the private sector will continue during the next three months.
The labour market is tightening. 47% of the companies report that the supply of labour will be a constraint if demand increases. The share was 40% in the previous round and 24% one year ago. The shortage of skilled labour is most pronounced in building and construction and petroleum-related industry, although service industries report that the supply of labour is increasingly a constraint. However, there are wide geographical variations. As in the previous round, labour shortages are most severe in Regions South-West and North-West.
Costs, prices and profitability
Companies are expecting annual wage growth of about 4½ % on average in 2006. In the first round of interviews in 2006, companies expected annual wage growth of 3¾%. Expectations are now in the range of 4% to 5¼%. Building and construction and service industries are expecting the highest wage growth, while retail trade and the local government and hospital sectors are expecting the lowest wage growth.
Selling prices have increased in all industries during the past 12 months. The rise in prices is strongest in corporate services and building and construction. In retail trade and household services, the price rise is moderate. In the period ahead, the share of companies expecting prices to rise at a faster pace is somewhat larger than the share expecting prices to rise at a slower pace. The share of companies expecting a more rapid price rise is highest in corporate services and the export industry. In building and construction, a larger share of companies expects prices to rise at a slower pace, probably because prices in the industry have already risen considerably.
Profitability continues to improve in the entire private sector, due to increased activity, higher selling prices and enhanced efficiency. Suppliers to the petroleum industry, particularly shipyards, again report the most substantial profitability improvements. Corporate services and the export industry also report solid profitability improvements during the last period.