Norges Bank

Regional network report

Regional network 4/2004

Interview period: August and September 2004

Responsible: Region East - Asplan Viak

Summary

  • In this round of interviews, all industries report that growth in output and demand remains solid. This development is expected to continue during the next six months.
  • Manufacturing reports solid growth in output. The growth rate in the export industry is somewhat lower than in the last interview round. Domestically oriented manufacturing is experiencing solid and accelerating growth due in part to growth in demand in retail trade and building and construction.
  • Large onshore development projects such as Ormen Lange and Snøhvit are contributing to solid growth for suppliers to the petroleum industry.
  • In service industries, demand growth is stable and solid in all regions. Growth is expected to remain firm in the next six month period.
  • The entire private sector is planning a moderate increase in investment in the next six to twelve months. The public sector reports that investment is stable. Tight local government finances are dampening the willingness to invest.
  • Employment is rising markedly now in building and construction. Growth is still moderate in retail trade and service industries. Manufacturing and the public sector report unchanged employment.
  • Annual wage growth in 2004 is currently projected at 3% for manufacturing and 3.5% for other sectors. This is lower than the projections for 2003 at the same time last year, when the projection was 3.5% for the private sector and 4.5% for the public sector.
  • Prices are unchanged in retail trade and corporate services, while other industries report a moderate rise in prices.
  • All industries report that profitability has improved.

Region South-West

  • Retail trade and building and construction report a pronounced upswing in demand. Growth in the building and construction sector now includes both residential and commercial building. Suppliers to the petroleum industry report solid growth, whereas growth seems to have come to a halt in the rest of manufacturing, and particularly in the export industry.
  • In the period ahead, most industries expect moderate to solid growth. However, expectations are somewhat lower than earlier, particularly in the export industry.
  • The willingness to invest appears to be strong in retail trade. Otherwise, there are few signs of increased investment.
  • Employment continues to rise in building and construction. Employment is also rising in retail trade. In manufacturing and service industries, however, there is little or no growth in employment, in spite of expectations of continued growth. In manufacturing, the share of contract labour is growing.
  • The supply of qualified labour is still satisfactory in most industries.
  • Wage growth in 2004 is projected at 3.5% in the private sector and 4% in the public sector.
  • All industries, except household services, report that selling prices are unchanged. Imported price declines and/or increasing use of labour from low-cost countries (either in the form of contract labour in Norway or production abroad) are curbing price inflation.
  • Profitability is approximately unchanged in manufacturing and moderately improved for suppliers to the petroleum industry and service industries. Retail trade and building and construction report solid growth in profitability.

 Region South

  • Activity is increasing and market prospects are positive in all industries. The export industry, building and construction and household services report the strongest growth.
  • Growth in domestically oriented manufacturing is solid, but is on the whole somewhat slower than growth in export-oriented enterprises.
  • The building and construction sector reports a pronounced increase in demand, but reports from our contacts differ considerably.
  • The service sector reports solid growth, but household services report stronger growth than corporate services.
  • There are signs of a moderate increase in investment in manufacturing, retail trade and service industries. Public sector investment seems to be stable.
  • Employment is stable in the region as a whole as well as across industries. However, seasonal and temporary workers are being used extensively.
  • As in the previous interview round, the supply of qualified labour is satisfactory.
  • Annual wage growth is approximately 3.5% in all industries.
  • Selling prices in all industries have been more or less stable in the last three months.
  • Profitability is showing solid improvement, except in retail trade where profitability among our contacts has been stable.

 Region East

  • In this interview round, all industries report moderate to solid growth in demand. In the next six-month period, growth in output and demand is expected to be solid.
  • In manufacturing, we see a slowdown in growth in relation to the last round of interviews, particularly in the export industry. Growth in oil refineries and the chemical industry is flat, whereas demand growth is solid in the pulp and paper industry and technology companies supplying goods for example, to the car industry.
  • Companies supplying goods to the building and construction industry as well as media companies report solid growth, whereas demand is virtually unchanged for the food and beverage and publishing industries.
  • Residential construction in particular is contributing to solid and increasing growth in the building and construction industry. Growth is also solid in the construction sector. New commercial building activity is still limited in the Oslo area, but there is growth in refurbishing activity.
  • Retail trade reports continued sharp growth in demand for consumer durables. In the service sector, growth in corporate demand for IT and consulting services is solid. Companies also report solid growth in household and corporate demand for travel and telecommunication services.
  • No one reports a decline in investment, and manufacturing and the public sector report that the investment level is unchanged. Retail trade and service industries report plans to increase investment moderately.
  • Companies in the building and construction sector report solid growth in employment and service industries report moderate growth. Employment in retail trade remains unchanged, whereas manufacturing and public sector employment has fallen slightly.
  • Annual wage growth in the private sector in 2004 is projected at 3%, or ½ percentage point lower than projected in the last interview round.
  • In this round, we have registered on average unchanged or moderately rising selling prices in all industries.
  • Manufacturing, retail trade and service industries have reported a moderate to solid improvement in profitability. The building and construction industry reports that profitability remains unchanged, in spite of solid growth in demand and a rise in selling prices.

 Region North-West

  • In general, developments in the region are positive, although some industries are experiencing growth from a low level, and other industries are still going through a period of restructuring.
  • Developments are being driven by higher activity and demand in the oil and gas industry, increased private demand, growing willingness to invest and increased building activity.
  • New orders for shipyards, particularly from the offshore sector which has increased its exploration activity, have risen in the last period.
  • Growth in corporate services is considerable and is somewhat stronger than growth in household services. The travel industry has had a normal summer season.
  • Retail trade reported strong growth in the building supply sector and the furniture industry in the last interview round, while growth in other sectors of retail trade has been moderate.
  • Very few companies report employment growth or plans to increase employment. Existing or contract labour or outsourcing will be used to cope with increased activity.
  • The supply of qualified labour is satisfactory in most industries, but there are some signs of a tightening labour market in building and construction.
  • The rise in prices is being restrained by strong competition in most industries.
  • Wage growth has been moderate with an increase of approximately 3% in manufacturing, and between 3.5% and 4% in service industries and the public sector respectively.
  • Profitability has improved moderately, primarily as a result of higher volumes, but rationalisation and restructuring measures implemented earlier have also contributed to improving profitability in manufacturing and to some extent in retail trade. Both the fishing industry and deep-sea fishing are struggling with poor profitability.

 Region North

  • The general impression from this round of interviews is that there is still growth in demand in all industries. Growth is strongest for domestically oriented manufacturing, the export industry, building and construction and corporate services, while growth is more muted in retail trade and household services.
  • The outlook for the next six months indicates that demand growth will slow in all industries except household services where demand is expected to increase at a somewhat faster pace.
  • The public sector reports a sharp reduction in planned investment, while private sector investment is expected to increase. Both manufacturing and service industries are investing in rationalisation measures and maintenance.
  • Employment continues to rise in the building and construction sector. Employment growth is also solid in the public sector and moderate in service industries. Employment is approximately unchanged in manufacturing and retail trade.
  • The supply of qualified labour is at a normal level, but it is still difficult to recruit health and care workers, managers in the public sector and skilled labour in building and construction and accounting.
  • Annual wage growth for 2004 is projected at 4.0 % in the public sector, 3.5% in service industries and 3% in manufacturing.
  • Domestically oriented manufacturing reports that prices are rising at the same pace as in the last round. Prices have been increased primarily to cover increased raw material and labour costs. The export industry continues to experience a rise in prices driven by the exchange rate and higher international demand. The rise in prices has been higher in the last three months than in the previous period. Prices in retail trade and service industries are stable. Prices in building and construction have not changed in the last period.
  • Companies report that profitability has continued to improve in the last three months. These improvements are most pronounced in the building and construction sector and are somewhat more moderate in the export industry.

 Region Central Norway

  • The economic situation has not changed in the last half year.
  • There is growth in manufacturing output, service industries, building and construction and retail trade. Most companies report that growth in activity and their industries is "normal".
  • Our contacts expect that growth in the period ahead will be approximately in line with growth so far in 2004.
  • Growth is still strongest in retail trade for consumers, and still appears to be stronger for capital goods than for consumer goods.
  • Employment is generally stable, but in retail trade and services there seem to be signs of moderate growth. Employment, also at the company level, is largely stable. There are virtually no companies engaged in extensive new recruitment or workforce reductions.
  • The supply of qualified labour is still high for nearly all types of skills. A large number of people are still seeking employment, and when jobs are advertised the number of applicants is very high. The supply of IT expertise is not as extensive as it was in 2003.
  • The rate of investment in the region is fairly stable, and public sector investment is still high.
  • There are signs of a moderate increase in selling prices for domestically oriented manufacturing, building and construction and service industries. An important reason for this seems to be that cost increases are now being passed on to selling prices.
  • Wage growth is projected at close to 3.5% in 2004.
  • Profitability is improving due to increased activity.

 Region Inland

  • Domestically oriented manufacturing is experiencing solid growth. Growth is picking up primarily as a result of a sharp increase in building-related manufacturing (building supplies, furnishings and prefabricated housing). The market outlook is favourable, due in part to increased building activity and strong demand for many consumer goods. Capacity constraints may limit further growth in some industries.
  • The export industry as a whole reports growth in demand, but the picture is mixed. A number of companies are benefiting from stronger international markets, while some are struggling in the face of competition.
  • Building and construction companies are experiencing strong, stable growth in demand compared with the second quarter. Residential construction and demand in the local government sector in particular are providing a boost to the construction industry. The outlook for the next six months indicates that growth will remain solid.
  • Business and household demand for services remains strong. The hotel industry, travel industry, real estate business and consultancies are among the industries that report positive developments.
  • Growth in retail trade is still fairly strong, approximately the same as in the last interview round.
  • There are indications of a moderate increase in investment in the private sector. Some growth is expected in both manufacturing and service industries. The local government sector reports that investment will fall in 2005.
  • Private sector employment continues to rise moderately, but the picture is mixed. The building and construction sector is experiencing the strongest growth, while manufacturing employment is stable. The local government sector reports that employment is still falling slightly.
  • Price changes remain moderate in most of the region's industries.
  • Profitability is improving in most industries, especially in building and construction. The reason for growth in all industries appears to be higher volumes and moderate cost increases combined with a continued strong focus on rationalisation measures.

In autumn 2002, Norges Bank established a regional network of enterprises, organisations and local authorities throughout Norway. More about the regional network

Published 3 November 2004 12:41