Norges Bank

Regional network report

Regional network 1/2005

Interview period: January 2005

Responsible: Region Inland. Østlandsforskning

Summary

  • As in the last report, the picture is marked by solid growth in all industries. None of the regions have reported a decline in output/demand for any industry.
  • The outlook for the next six months is considered positive for all industries. The export industry, building and construction and in particular the petroleum industry are more positive than in the previous round.
  • Forty per cent of the companies report that they would have had problems dealing with expected or unexpected growth in demand. There are major differences between industries. Wholesale and retail trade have the least problems, whereas there are few building and construction companies that can deal with growth in demand without problems.
  • Four out of five companies do not consider the supply of labour to be a constraint on output. The share that indicates that a shortage of labour is a constraint is largest in the building and construction sector.
  • All industries report a modest increase in investment. Investment growth appears to be edging up in manufacturing, wholesale and retail trade and in the public sector.
  • Employment is rising moderately in the private sector. Employment growth is strongest in building and construction. In manufacturing and the public sector, employment is stable. The private sector is planning a moderate increase in employment in the period ahead. Employment growth is expected to be strongest in building and construction and wholesale and retail trade.
  • The average projection for annual wage growth in 2005 is 3.6 per cent. This projection is the same as in the last round but is somewhat higher than the projections for 2004 made at the same time last year (3.2 per cent).
  • In the last year, prices have risen in all sectors except household services. The rise has been moderate in all industries.
  • Prices are expected to rise at a somewhat faster pace in the next 12 months. Thirty-five per cent of the companies expect prices to rise at a faster pace (or to decline at a slower pace) while 16 per cent expect prices to rise at a slower pace.

Region South-West

  • Demand is rising in all sectors and the growth rate was higher in the fourth quarter of 2004 than earlier in the year. Growth is especially strong in oil-related manufacturing and building and construction, where residential construction is providing the main impetus.
  • The market outlook for the next six months is very bright for all sectors except domestically oriented manufacturing, which reports more conservative plans for the future. With the same exception, all sectors express greater optimism now than three months ago.
  • Prospects for the future and increased profitability are reflected by a slowly increasing willingness to invest. Oil- and gas-related investment will probably reach a new peak in 2005.
  • Employment increased markedly in building and construction, whereas employment growth was moderate in oil-related manufacturing and service industries. All sectors are expecting moderate growth in employment in the next three months.
  • Nearly one-third of the contacts indicate that the supply of well-qualified labour may impose a constraint on continued growth in output. The building and construction and service sectors are facing the greatest challenges, including a lack of qualified project managers.
  • In contrast to the last reporting period, a number of sectors are reporting a rise in prices. Our figures indicate that prices have increased by about 4 per cent in manufacturing, building and construction, wholesale and retail trade and corporate services in the last 12 months. Labour shortages are pushing up prices in some industries.
  • Profitability is still improving substantially in all sectors. As a result of cost reductions and higher volumes, capacity utilisation has improved and margins are higher.
  • Two out of three enterprises report that they would have some or considerable capacity problems if demand increased. This applies in particular to oil-related manufacturing and building and construction.

Region South

  • In this round of interviews, all industries report increased activity. Growth is strongest in building and construction and wholesale and retail trade.
  • The market outlook is positive and optimism is high. Although some enterprises are uncertain about the future, the majority expect further growth. Manufacturing as a whole expects marked growth in the next 6 months. The market outlook is most positive for building and construction and growth is expected to be strong. Service industries expect solid growth in activity whereas growth is expected to be moderate in wholesale and retail trade.
  • There has been solid growth in domestically oriented manufacturing in the last quarter. Building and construction report a sharp increase in demand as in the previous period.
  • Growth has been solid in both household and corporate services and strong in wholesale and retail trade in the last reporting period.
  • Building and construction are approaching their capacity limit. A shortage of skilled labour is the most important constraint. There is still excess capacity in manufacturing although some enterprises are operating at or above full capacity utilisation, whereas there is substantial excess capacity in service industries and retail trade.
  • Manufacturing reports pronounced growth in investment. Investment growth is moderate in wholesale and retail trade and service industries. Public sector investment remains stable.
  • So far, the upturn in the Norwegian economy has only resulted in a modest improvement in the labour market in Region South. If we consider the last quarter and the next three months as a whole, we find, with the exception of retail trade, moderate growth in the entire private sector.
  • Manufacturing, building and construction and the public sector are expecting 4 per cent annual wage growth for 2005 while service industries are expecting 4.5 per cent. Wage growth for 2005 is expected to be somewhat higher for the private sector than expected for 2004 at the beginning of last year, and expected wage growth is slightly higher than annual wage growth reported at the end of 2004.
  • Selling prices have risen considerably in domestically oriented manufacturing and moderately in wholesale and retail trade in the last 12 months. In the export industry, building and construction and other service industries, price developments have been stable. The export industry expects the rise in prices to remain flat in 2006, whereas domestically oriented manufacturing and building and construction are expecting prices to rise at a faster pace.
  • Profitability is improving in all industries. Domestically oriented manufacturing and building and construction report the strongest growth in profitability.

Region East

  • All industries in Region East report that the activity level is still high and increasing. Growth is at approximately the same level as in the previous round. The market outlook ahead is positive and the growth rate is expected to remain stable in the period ahead.
  • Growth in demand and output is continuing in manufacturing. No manufacturing enterprise has reported a fall in demand. In the domestic market, suppliers to building and construction and to consumer-oriented manufacturing report the strongest growth in the last period. In the export industry, consumer-oriented manufacturing and paper and pulp experienced the strongest growth.
  • The activity level is still high in building and construction and growth in residential construction remains strong. The market for commercial buildings has also increased and there is solid growth in the construction sector.
  • In retail trade, solid growth in consumer goods such as clothing and footwear and consumer durables continues. There was a sharp rise in new car sales particularly in November and December.
  • Demand for both household and corporate services is solid. The travel industry providing services to the private market reports solid growth as do the financial and telecommunications sectors. Commercial services, transport/forwarding as well as job placement services report solid and in some cases strong growth.
  • Pressures on factors of production are reported to be moderate, except in the building and construction sector. Labour shortages are viewed as a constraint.
  • Investment appears to be increasing moderately throughout the private sector and there are few indications of accelerating growth. The investment level in the public sector is unchanged.
  • Employment has increased moderately in the last period due to increased employment in wholesale and retail trade and in building and construction. Employment in the private sector will continue to increase moderately in the next three-month period. The public sector is planning a slight reduction in employment.
  • Selling prices have increased moderately in the last year. It appears that the rise in prices will pick up in the period ahead. A clear majority of the contacts expect a higher rise in prices in the next 12 months.
  • Profitability continues to improve in all industries, but at a slower pace than in 2004.

Region North-West

  • For most industries in Region North-West, the activity level continues to rise as many companies are operating within flexible capacity constraints. The export industry and the offshore supplier industry report accelerating growth. The market outlook ahead is positive, especially for the export-oriented maritime industry and process industry.
  • None of the manufacturing companies has reported a fall in demand. In the domestic market, manufacturing reports moderate growth in demand. In the export industry, developments are positive for furniture, marine, maritime and offshore-oriented industries as well as the process industry. In the last reporting period, growth was strongest for suppliers to the offshore sector.
  • Building and construction have experienced moderate growth in activity in the last period.
  • Wholesale and retail trade report moderate and slower growth, especially for furniture, white and brown goods although there is still solid growth for clothing and footwear. The market outlook indicates continued solid growth on the whole.
  • Demand growth for both household and corporate services is solid. Commercial services, transport/forwarding as well as job placement services report moderate growth.
  • Capacity utilisation in the economy in Region North-West is high. An increasing number of industries seem to be focusing on optimising capacity. With improved technology, organisation and contract labour, they can increase capacity limits without considerable cost increases.
  • Investment appears to be increasing moderately, though somewhat more rapidly in the wholesale and retail sector than in the rest of the private sector. The public sector reports that investment is increasing.
  • Employment has remained stable for all sectors in the last reporting period and is expected to remain unchanged in the next three months except in wholesale and retail trade and building and construction, which are expecting growth.
  • Selling prices have increased moderately in the last year. Intense competition and flexible capacity are keeping prices at a low level. Approximately the same number of contacts expects prices to rise at a faster pace in the period ahead as those that expect the rise in prices to remain stable, but very few expect prices to fall.
  • In most industries, particularly in the process industry, profitability is improving.

Region North

  • The general impression from this round of interviews is that most industries are still experiencing growth in demand. Growth is strongest in domestically oriented manufacturing. Growth in the export industry as well as services and wholesale and retail trade is solid, whereas building and construction report moderate growth.
  • The outlook for the next six months indicates that demand growth in all industries will continue to be moderate to solid.
  • The public sector reports very strong growth in investment. Manufacturing expects strong growth in investment which suggests investment beyond ordinary maintenance. The private sector is largely investing in efficiency measures, expertise and maintenance. Wholesale and retail trade and the service industries are indicating moderate growth in investment.
  • In the building and construction sector, employment growth is stable due to a shortage of labour. The public sector reports a decline in employment and the service sector reports moderate employment growth. Employment in manufacturing and wholesale and retail trade is unchanged compared with the previous period.
  • The supply of qualified labour is satisfactory and for most industries will not be a constraint for increased activity. The building and construction sector is the exception and the lack of skilled labour remains a challenge.
  • Annual wage growth is expected to be between 2.5 per cent and 3 per cent in 2005. With the exception of manufacturing, this projection is lower than the projection for 2004 at the same time last year.
  • Prices are rising steadily in pace with wages and other factor inputs. The export industry is experiencing a sharp rise in prices driven by demand for ore, steel and seafood. Prices are rising sharply in building and construction due to increased demand. The rise in prices in wholesale and retail trade has been moderate, the same as during the last interview period. Prices for corporate services have increased moderately, while prices for household services are unchanged.
  • The export industry reports strong profitability growth due to higher prices and increased volumes. The service sector and wholesale and retail trade report solid growth in profitability whereas profitability growth is moderate in domestic manufacturing and building and construction.

Region Central Norway

  • There is solid growth in manufacturing output and private services.
  • The activity level in the building and construction sector is high and rising.
  • Growth in wholesale and retail trade is solid but the growth rate seems to be slowing. The rate of growth is still highest for capital goods.
  • Our contacts are optimistic about developments in 2005. They expect the growth rate to be approximately in line with the rate prevailing in the last half of 2004.
  • Employment is generally stable, but the building and construction sector is increasingly hiring foreign labour in response to a tighter labour market. There are signs that the labour supply has become somewhat more limited in the service sector.
  • Manufacturing and wholesale and retail trade report excess production capacity. Service companies report wider variations, and in the building and construction sector, a lack of skilled labour is limiting growth potential.
  • The rate of investment in the region is relatively stable. Public sector investment seems to have declined somewhat in 2005 compared with last year. There are signs of increased manufacturing investment.
  • Tender prices are rising in building and construction as a result of increased costs. In retail trade, prices have changed little on average. Prices have risen slightly for manufacturing and service industries.
  • Wage pressures seem to be low in the private service sector and manufacturing. The public sector expects 4 per cent wage growth in 2005, whereas wage growth is expected to be stronger in building and construction.
  • Profitability is improving due to increased activity, but there are no major changes for small and medium-sized enterprises.

Region Inland

  • All industries in Region Inland report increasing activity. On the whole, growth is at the level prevailing during the last round of interviews. The market outlook is positive and indicates that the growth rate will remain approximately the same in the period ahead.
  • Output and demand in manufacturing are rising. For domestically oriented manufacturing, growth is strongest for consumer-oriented companies and for the building supply sector. Continued growth is expected for the region's manufacturing industry. Growth in the export industry is expected to accelerate somewhat.
  • The building and construction sector is experiencing strong growth in demand. Residential construction and demand in the local government sector continue to provide a boost to the building industry. Commercial building activity has also started to pick up. The outlook for the next six months indicates that growth will remain solid.
  • Developments in wholesale and retail trade and services, including freight transport, banking, consulting and accounting, are generally positive in both the corporate and the household sector.
  • The economy in the region is far from the capacity limit, with the exception of the building and construction sector. Labour shortages are viewed as a constraint. The supply of highly skilled labour is a problem for some service companies.
  • The investment level is stable in the private sector. There is a slight rise in investment in wholesale and retail trade.
  • Employment is on the rise in the building and construction sector, while manufacturing employment appears to be stabilising after a slight fall. Employment growth is still moderate in wholesale and retail trade and other services.
  • Selling prices have increased moderately in the last year. The rise in prices is expected to pick up in the period ahead, due in part to higher commodity prices which are passed on to consumer prices. A clear majority of contacts expect prices to rise at a faster pace in the next 12 months.
  • Profitability is improving in most business sectors, but at a somewhat slower pace than in 2004.

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

Published 16 March 2005 13:59