| Interview round: |
5-2005 |
| Interview period: |
October and November 2005 |
Summary
Demand, output and market outlook
All industries report growth in demand and output during the period. Growth has been particularly strong for suppliers to the oil industry. The export industry also reports solid growth and a considerably higher growth rate in the last three months. Manufacturing companies that are supplying goods to the business sector and in particular to the construction market report solid growth. The picture is somewhat more varied in the food industry. Some segments (breweries, meat production, fish feed) report solid growth while other segments (parts of the dairy industry, potato industry) are struggling. Manufacturers of electrical household articles and white goods report weak growth, which may be due to intense competition from abroad. The same applies to the textile industry. On the other hand, manufacturing companies supplying goods to the maritime sector and to the fish farming industry report solid growth. Within the export industry there are reports of strong growth for the shipbuilding industry, ship equipment industry, furniture industry (niche products), fisheries and fish farming. As in the previous round, the signals from the processing industry are somewhat mixed due in part to high energy prices. On the other hand, suppliers to the oil industry have experienced 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 and somewhat stronger growth than in the previous period. This is especially true for construction and non-residential buildings, but also for parts of the residential market in central areas (e.g. in Trondheim). In service industries, overall growth is somewhat higher than in the previous round due to higher growth in corporate services. In retail trade, growth is lower than in the previous round.
The market outlook is positive and approximately in line with the market outlook in the previous round. Overall, growth is expected to be somewhat weaker during the next six months than what we have seen in the last three months.
Capacity utilisation and investment plans
Just under 43% of our contacts report that they would have some or considerable difficulties accommodating an increase in demand. Building and construction and some manufacturing sectors (oil-related) have capacity problems, and compared with the previous round we see that considerably more companies report that they would have substantial difficulties accommodating growth in demand. All industries report plans for moderate to solid growth in investment. Manufacturing and the local government and hospital sectors are expecting the strongest growth. Retail trade expects somewhat lower investment growth compared with the previous round.
Employment and labour market
Employment is increasing at roughly the same pace as in the previous round, with moderate growth in most sectors. Employment growth is highest in building and construction, whereas the public sector reports zero growth, as in the previous round. In manufacturing, employment growth has changed from zero growth in the previous period to moderate growth in this round. In the next three months, growth is generally expected to remain unchanged in all sectors except manufacturing, which is expecting zero growth. There are, however, regional variations in the employment pattern. In the North-West and South-West, there has been solid growth in employment during the last three months, and this solid growth is expected to continue during the next half year in the North-West. A large portion of the solid employment growth in Western Norway may be ascribed to the high oil-related activity. Nearly 28% of the contacts report that the labour supply will impose a constraint on activity if demand increases. This is somewhat higher than in the previous round. There is a shortage of qualified labour in particular in building and construction and petroleum-related manufacturing.
Costs, prices and profitability
Annual wage growth is fairly stable at about 3.5%, which is generally the same as in the previous round. Wages pressures seem to be strongest in building and construction.
There has been a slight upward adjustment in the year-on-year rise in selling prices in manufacturing (both domestically oriented and export oriented) in this reporting round compared with the previous round. In retail trade, the rise in prices has been adjusted downwards to a slightly negative rise in this round. In building and construction, prices have risen at the same pace as in the previous round, but this sector has experienced the highest rise in prices. In service industries, the rise in prices has decelerated compared with the previous reporting round. 26% of the contacts expect prices to rise at a faster pace in the next 12 months. This is an increase of 5 percentage points since the previous round. Approximately the same number of contacts expects prices to rise at a faster pace as those that expect prices to rise at a slower pace during the next 12 months. Manufacturing and building and construction expect a slower rise in prices, while retail trade and service industries expect a marginally brisker rise in prices during the next 12 months.
Profitability is still improving in the entire private sector. Increased activity and a rise in selling prices are contributing to somewhat greater profitability improvement in domestically oriented manufacturing and building and construction. Profitability improvements are still greatest in the offshore industry but not as great as in the previous reporting round.