October 24, 2022
Norwegian industrial managers are reporting an increase in production and employment in manufacturing in the 3rd quarter, but growth is lower than in the previous quarter. Industrial managers report a decrease in new orders and the general expectations for the 4th quarter of 2022 are negative among most of the industrial leaders. At the same time, it is still a high proportion of the managers who report low profitability and high price growth of input factors
The business tendency survey for the 3rd quarter of 2022 still shows growth in total output, but the growth rate is lower than in the 2nd quarter. The producers of Capital goods and Consumer goods are experiencing an increase in production while the producers of Intermediate goods report a decline in production for the first time since the 2nd quarter of 2020. There are still a high proportion of the industrial leaders who report that lack of access to skilled labor, raw materials and other input factors have limited production volume in the 3rd quarter. Lack of raw materials and input factors are still linked to logistics challenges in the world market, which this year have been reinforced by corona shutdowns in China, the war in Ukraine and the energy crisis in Europe.
Industrial leaders report growth in total industrial employment in the 3rd quarter of the year, but this growth is lower compared to the 2nd quarter. There is employment growth within all producer types, but the growth is weakest for producer of consumer goods.
Reduction in new orders
Industrial leaders report a decline in new orders in the 3rd quarter from both the export and home markets. The decline is strongest for the producers of intermediate goods. A decline is also reported for the producers of consumer goods, while the producers of capital goods report increase in new order in both markets.
Reduced demand contributes to the fact that growth in the total stock of orders in manufacturing has stopped, and in the 3rd quarter it was unchanged compared to the previous quarter. For manufacturers of intermediate goods, a clear decrease in total stock of orders is reported, while for manufacturers of capital goods and consumer goods, growth is reported.
Industrial managers are reporting significant growth in the prices, both in domestic and export market for overall manufacturing in the 3rd quarter. Price growth is reported for all types of goods in both markets. For producers of consumer goods, the growth in prices is particularly strong. Producers of intermediate goods are largely export-oriented. The levels of the diffusion indexes for export and domestic prices are marginally lower than in the previous quarter, but they are still among the highest measured since this survey began in 1990.
A large proportion of industrial managers report continued growth in Cost prices in the 3rd quarter. The level of the diffusion index for cost prices is the highest measured since the first survey in the fourth quarter of 2011. It is producers of consumer goods who have the highest growth in cost prices. Overall, stronger growth in cost prices than in product prices was reported. This substantiates that there are reports of declining Profitability in manufacturing, as a whole in the 3rd quarter.
Pessimistic assessment of the 4th quarter
The general outlook for the 4th quarter of 2022 is negative. Only producers of capital goods show optimism, but this is lower than in the previous quarter. The producers of intermediate goods and consumer goods have a negative view of the coming quarter.
The industrial leaders expect zero growth in total production volume and a moderate increase in average employment in the 4th quarter compared to the 3rd quarter. Lower new orders from both the home and export markets and a decrease in the total stock of orders are expected. It is the producers of intermediate goods who report the weakest future prospects and they expect a decrease in production volume and new orders from both the home and export markets in the 4th quarter. Producers of consumer goods expect unchanged production and new orders from the domestic market, while they expect a moderate increase in new orders from the export market. The producers of capital goods show an increase in all these indicators. Producers of all types of goods also expect that the cost prices will increase further in the 4th quarter.
Industry leaders report that investment plans are adjusted downwards somewhat for manufacturing. This indicator has not shown a decline since the 3rd quarter of 2020. 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 the expected development in demand limits investments. The proportion of industrial leaders who believe that the Prices of investment goods are a limiting factor on investment is as large as in the previous quarter.
Source: Statistics Norway
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