Regional network 3/2008
- Regional Network report
Interview period: April and May 2008
Demand, output and market outlook
In this round, our contacts report markedly lower growth. Compared with the previous round, growth has slowed in virtually all regions and industries with the exception of suppliers to the petroleum industry, where growth remains buoyant. Growth has decreased by 50% compared with the previous round and is on the whole moderate. During the past three months, growth has been strongest among suppliers to the petroleum industry, followed by corporate services. In building and construction, growth is mildly negative.
The rate of manufacturing growth is moderate and falling compared with the previous reporting round. Manufacturers providing goods to the building and construction industry in particular report lower growth. Reduced residential construction has led to a levelling off and a decline in the industry. The processing industry reports continued high activity and increased demand in the international market. Capacity constraints, on the other hand, are still limiting companies’ ability to exploit this growth. The fishing and fish farming industry reports growth in output and exports of fresh white fish, pelagic and salmon. Contacts in manufacturing providing goods to the fishing and fish farming industry report solid growth. Growth among suppliers to the petroleum industry remains solid and is at the same level as reported in the previous round. The most important reason for this is high oil prices, and operators are using more resources than earlier to maintain output levels. This in turn leads to an increased need for maintenance.
Our contacts report a decline in demand and activity in the building and construction sector. There is growth in the commercial building market, but this does not fully compensate for the decline in residential building. Retail trade reports moderate growth although the growth rate is slowing compared with the previous round. The industry recording the strongest growth after suppliers to the petroleum industry is services, although growth has also slowed markedly in this industry compared with the previous round. Financial services are dragging down growth. Commercial services are also exhibiting somewhat slower growth than previously observed.
On the whole, growth is expected to be somewhat weaker during the next six months. The market outlook for export-oriented manufacturing indicates moderate growth in the period ahead. Suppliers to the petroleum industry expect the strongest growth, while building and construction expect a moderate reduction in demand during the next six months. Retail trade expects moderate growth in demand and activity. Demand for expensive capital goods is expected to slacken, while some growth in demand for sports equipment, clothing and other consumer goods is expected.
Capacity utilisation and supply of labour
Capacity utilisation remains high but is somewhat less constrained than in the previous round and at this time last year. As in previous rounds, capacity utilisation is highest and labour shortages most severe in building and construction. The labour market seems to be somewhat less tight. While capacity utilisation is approximately unchanged in the service industry and retail trade, it is somewhat lower in manufacturing. 55% of the companies are operating at or close to capacity limits.
Employment and the labour market
Employment has increased moderately during the past three months and employment growth is approximately the same as in the previous reporting round. As in earlier rounds, employment has increased most in the service industry. Employment growth is expected to continue in the period ahead, albeit at a somewhat slower rate.
Costs, prices and profitability
Estimated wage growth is somewhat higher than in the previous round, and almost one percentage point higher than expectations for 2007 reported a year ago. Annual wage growth for 2008 is estimated at 5¾% for all industries as a whole. Higher wage growth expectations in the municipal and hospital sector in particular are contributing to this. There are fewer changes in expectations in the other sectors. In this round, all sectors expected annual wage growth to be in the interval between 5% and 6%. Competition for labour is expected to contribute to a settlement that is more expensive than expected for many.
The rise in prices slowed somewhat compared with the previous round and in relation to the highest in the regional network’s history recorded in November last year. Compared with the previous round, the rise in prices was lower in the export industry, building and construction and retail trade, but higher in domestic manufacturing and household services. The rise in prices, although slowing somewhat, is still strongest in building and construction at 6% over the past 12 months. The general picture is an expectation of a lower rise in prices during the next 12 months, especially in manufacturing, building and construction and corporate services. In retail trade and household services, the price rise is expected to remain approximately unchanged.
Growth in operating margins has slowed somewhat compared with the previous round. On the whole, operating margins have increased somewhat during the past 3 months compared with the same period last year. Margins in the export industry, offshore industry and retail trade have been weaker during the past 3 months than during the same period last year. Operating margins in domestically oriented manufacturing, building and construction and household services continue to increase, although at a slower pace than during previous rounds.
Charts - regional network (pdf, 37 kB)