Interview period: January 2008

Summary

Demand, output and market outlook
Growth in the business sector remains solid but is weaker now than three months ago. All industries except building and construction and domestically oriented manufacturing report solid growth.  Both building and construction and domestically oriented industry report moderate growth, although growth is weakest in building and construction. All industries report slightly weaker growth than during the previous round.

Growth in the export industry has been solid during the past three months, but slightly slower than during the previous round. However, the appreciation of the krone appears to have been a major problem for some of the export companies during this round of interviews. Suppliers to the petroleum industry continue to experience growth. Some companies report fluctuations in the level of activity with the start-up and completion of large projects, but in general the industry reports full capacity utilisation. Delays in deliveries (ships and equipment) are currently one of the greatest problems in the industry. The slowdown in residential building has become even more evident than in the previous round and is not being offset by growth in commercial building. Retail trade and the service industry report solid growth during the past three months, although growth has been somewhat slower than in the previous round.

Growth is expected to be moderate to solid during the next six months in all industries except building and construction, which expects a slight reduction in activity level in the period ahead. The rate of growth for the other industries is somewhat reduced compared to what was expected in the previous round. Suppliers to the petroleum industry as well as the service industry expect the highest growth.

Capacity utilisation and supply of labour
Capacity utilisation in Norwegian industry remains high, although it has fallen somewhat compared with autumn 2007. 56% of the contacts currently report that they would have some or considerable difficulties accommodating an increase in demand. This is fewer than in November 2007 but approximately the same as one year ago. About 49% of the contacts report that the supply of labour will restrict any increase in production. This is a slight reduction in relation to the previous round but a slight increase in relation to one year ago.

Employment and the labour market
Employment growth continues in all industries. However, growth has slowed somewhat in relation to the previous round and this applies to all industries. Employment growth in general is expected to be somewhat weaker during the next 3-month period. The changes are small, however, and are partly due to recruitment problems or that the companies are not interested in further expansion.

Costs, prices and profitability
All industries report relatively high wage growth in 2008. Estimated annual wage growth for 2008 is currently at more than 5½%, as a weighted average. Compared with estimates at the same time last year, wage growth is expected to be approximately one percentage point higher this year. Wage growth is strongest in building and construction and the service industry.

The rise in prices remains high but is slowing somewhat compared with the high level that was registered in the previous round of interviews. The rise in prices is highest in building and construction. Retail trade reports the lowest rise in prices. The number of contacts expecting a lower rise in prices in the next year (36%) is substantially larger than the number expecting a higher rise in prices (24%). A majority of the contacts in building and construction expect a lower rise in prices in the period ahead. The share of companies expecting a higher rise in prices is largest (30%) in retail trade.

Operating margins are increasing in all industries except the export industry. On the whole, the rise in operating margins is slightly below the figures reported in the previous round. Suppliers to the petroleum industry report the most substantial increase in margins. The export industry reports a decline in operating margins during the last quarter, due in part to the strong Norwegian krone.

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