Regional Network: Weak outlook
According to Regional Network contacts, activity growth has slowed through autumn. Looking ahead, contacts expect lower activity owing to rapidly rising prices and costs, higher interest rates and a decline in new public sector orders. A far smaller share of enterprises now report capacity constraints, and the number of enterprises reporting difficulties in recruiting qualified labour has fallen. Nevertheless, more contacts than normal report capacity constraints and continue to describe the labour market as tight.
The rise in prices is unusually high, but more than half of the contacts expect the rise to slow ahead. A number of contacts point out that prices for certain intermediate goods have fallen recently. Contacts expect annual wage growth of 4.0% in 2022 and 4.2% in 2023.
Contacts expect rapidly rising prices and costs, higher interest rates and fewer new public sector orders to dampen activity through winter. Prospects are the weakest since January 2009. Many contacts describe the market as hesitant, and most describe the uncertainty as unusually high. Contacts in retail trade and construction expect the strongest decline, while in oil services, activity is expected to pick up ahead. Profitability among contacts is considerably lower than a year ago.
In spring, the share of contacts that reported capacity constraints reached the highest level since 2007, but declined somewhat in the previous survey. Over the course of autumn, the share has declined substantially. The decline is broadly based.
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