The business tendency survey for the 4th quarter of 2023 shows that overall industrial production fell moderately, but there are large sector differences. While for producers of Covers industries such as machinery and equipment, ships, boats and oil platforms, repair and installation. Often referred to as the engineering industry. are experiencing an increase in production, for the producers of Covers industries such as wood and wood products, paper and paper products, basic chemicals and basic metals. Often referred to as traditional export industries. and Covers industries such as food products and beverages, printing and reproduction, pharmaceuticals and furniture. report a decline.
Industrial leaders report growth in total industrial employment in the 4th quarter 2023. It is the producers of capital goods that are responsible for the growth. Producers of consumer goods and intermediate goods report a decrease in employment.
Decreasing new orders
Overall, industrial leaders report a decline in new orders from both the domestic market and the export market in the 4th quarter of the last year. There is still a clear decline for the producers of intermediate goods and consumer goods from both domestic and export market. Producers of capital goods, on the other hand, report unchanged new orders from the domestic market and an increase from the export markets.
Reduced demand contributes to a marked decline in the total stock of orders in manufacturing in the 4th quarter. Producers of intermediate goods and consumer goods report a clear decrease in total stock of orders, while producers of capital goods report a more moderate decrease. Capital goods is dominated by businesses in the oil supply industry, which are particularly in the industry of building ships and oil platforms. Within this type of goods, there are reports of clear production growth combined with a decrease in new orders from the domestic market and a marked decrease in the total stock of orders. A great many contracts were signed with the Norwegian extraction industry in the wake of the decision to develop a number of new fields on the Norwegian continental shelf around a year ago. With few new field developments in the recent quarters, the growth in new orders from the domestic market first stopped and then fell in the last quarters in this industry.
– With ever-increasing production, the businesses within capital goods as a whole now have higher production than order growth, and thus a falling stock of orders, says advisor at SSB Edvard Andreassen.
Many industrial managers are reporting significant growth in the prices, both in domestic and export market for overall manufacturing in the 4th quarter. Price growth is reported by the producers of capital goods and consumer goods in both markets. The price level for the producer of intermediate goods is unchanged in both markets. For producers of consumer goods, the growth in prices is particularly strong. The levels of the diffusion indexes for prices on export and domestic markets are somewhat lower than in the previous quarter, which suggests that price growth is slowing down compared to previous quarters.
A large proportion of industrial managers report continued growth in cost prices in the 4th quarter. The level of the diffusion index for cost prices is marginally lower than in the previous quarter. It is producers of consumer goods who have the highest growth in The development in the prices that the company pays for the goods and services that are included in the production (product input), and on the prices of production equipment and facilities used in the production process.. Overall, stronger growth in cost prices than in product prices was reported, it is not surprising that there are reports of declining The development in the profitability of the company's sales of goods or services. Profitability means the change in the difference between current operating expenses and current operating revenues. in manufacturing, as a whole, in the 4th quarter.
Negative expectations for the 1st quarter of 2024
The general outlook for the 1st quarter of 2024 is moderate negative for manufacturing, as a whole, but there are large differences between the sectors. Only producers of capital goods show optimism. The producers of intermediate goods and consumer goods have a pessimistic view of the coming quarter.
The industrial leaders expect unchanged total production volume and a moderate increase in average employment in the 1st quarter of 2024 compared to the 4th quarter of 2023. A decrease in new orders from the domestic market is expected, while it is expected moderate growth in new orders from the export market. The overall stock of orders is expected to decrease.
It is the producers of intermediate goods who report the weakest future prospects. They expect a decrease in production volume and new orders from the domestic market, as well as a lower stock of order in the 1st quarter of 2024. Producers of consumer goods expect unchanged production, lower employment, falling new orders from the domestic market and a reduced overall stock of orders.
The producers of capital goods expect continued growth in production, employment and new orders from both markets, and a moderate rise in overall stock of orders. But the diffusion indices for all these expectation indicators are lower than they were in the previous survey, in particular the level of the diffusion index for expected production has fallen.
– The level of activity linked to the development of the many new fields on the Norwegian continental shelf is expected to peak during 2024, so it is natural that the expected production growth in the supplier industry is dampened. says Edvard Andreassen.
Producers of all types also expect that the prices of intermediate goods will continue to increase in the 1st quarter of 2024, but to a somewhat lesser extent than before.
Industry leaders report that investment plans are moderately reduced for the industry as a whole. In the survey of 3rd quarter of 2021, a new statistics table (see box at the bottom of the article) was introduced. This table shows the development in which factors the managers state as limiting the investments. In this quarter, there is a higher proportion of industrial leaders who state that financing costs limits investments. The proportion of industrial leaders who believe that the The prices of the investment goods (production equipment and facilities used in the production process) that the company purchases are so high that it limits the implementation of planned investments. are a limiting factor on investment is still high.
The industrial confidence indicator suggests lower activity in the 1st quarter
This is the average of the responses (balances) to the questions on expected volume of production, total stock of orders and inventories of own products for sale (the latter with an inverted sign). See Definitions in ‘About the statistics’ for further details. in the 4th quarter of 2023 was minus 4.9 (Figures that are adjusted for calendar effects and seasonal variation. Such adjustment gives a more accurate picture of the underlying trend in the time series and makes it easier to compare the results of subsequent quarters.-adjusted) which is down from -2.5 in the previous quarter. The indicator is still below the historical average of 2.9.
The industrial confidence indicator indicates a clear decline in production in the coming quarter for producers of all product types. While the industrial confidence indicator for producers of capital goods falls from +3.8 to -2.9, the indicator for producers of intermediate goods increases from -8.2 to -6.0,
Values above zero indicate that total output will grow in the forthcoming quarter, while values below zero indicate that total output will fall. International comparisons of the industrial confidence indicator are available from Eurostat (EU), The Swedish National Institute of Economic Research and Statistics Denmark.
Demand and strong competition limit production
There are a higher proportion of industry leaders who highlight that weak demand and strong competition are factors that contributed to limiting production in the 4th quarter of 2023. There is also still a high proportion of industry managers who point out that a lack of qualified labor is a factor that contributed to limiting production in the 4th quarter. The sum of percentages for those who have reported that lack of qualified labour and raw materials/electric power limits production, plus the percentage of establishments with capacity utilisation above 95 per cent. is still high, but it has also fallen gradually in recent quarters.
The figure shows that the proportion of industrial managers, who point out that a lack of access to raw materials and/or electricity are factors that contribute to limiting production, peaked in the 1st quarter of 2022, and has since decreased somewhat. At the same time, the figure shows that the proportion of industry leaders who point out that weak demand and strong competition have limited production reached a bottom in the 1st quarter of 2022 and has since risen somewhat. Industry leaders reporting that the lack of qualified labor is limiting production increased significantly from mid-2020 to the end of the pandemic, and remains at a historically high level.
The average How much of the available production capacity is utilised. A high capacity utilisation means that it is difficult to produce more without investing, while a low capacity utilisation means having capacity that is not being used. for Norwegian manufacturing was calculated to 77.9 per cent at the end of the 4th quarter. This is somewhat lower than at the end of 3rd quarter of 2023 and the indicator has fallen considerable since the peak in 1st 2022. The capacity is now at a lower level than the historical average of 80.0 per cent. International comparisons of average capacity utilisation are available from Eurostat (EU).
Timelines
The survey data was collected in the period from 9 December 2023 to 16 January 2024.
