Business cycle continued to weaken, but outlook improved
According to the Business Tendency Survey carried out by the Confederation of Finnish Industries (EK) in July, Finnish companies estimate that the business cycle has continued to weaken during the summer. The economy is recovering gradually, judging from the fact that the outlook has improved markedly after having hit rock bottom in the spring. However, the level of uncertainty remains high towards the autumn.
“In Finland, the business cycle has continued to weaken during the summer, but the outlook is picking up. The coronavirus crisis has hit different sectors in very different ways. Now that restrictions are being lifted gradually, services will be the first to return to normal. Driven by consumer demand, the retail sector has fared quite well, but the situation continues to escalate in manufacturing and construction. These differences will delay economic recovery both in Finland and internationally,” says Sami Pakarinen, Chief Economic Policy Advisor at the Confederation of Finnish Industries.
Business outlooks throughout the business community have increased to -11 from a disheartening -59 in April. In services, the outlook indicator has risen to close to zero. Judging from the outlooks, the worst phase of the coronavirus crisis will soon be over. Despite this, sales, production and employee expectations continue to be very weak, so we are not out of the woods yet.
“Fortunately, the decline in new orders in manufacturing stopped in July, but employee expectations predict weak development in terms of employment. It is important to remember that the virus continues to spread globally, and a potential second wave hasn’t really been taken into account in the economic forecasts. With a possible second wave, the autumn may be very difficult, as a prolonged crisis would also mean recurring impacts,” says Pakarinen.
Lack of demand currently the most significant problem for companies
The coronavirus crisis has heightened demand issues. Of the responding companies, 41% felt that insufficient demand was a problem. In manufacturing, lack of demand was reported by as many as 57% of the respondents. Provisions should also be made for problems in the export industry through various support measures.
“The pandemic has hit Finnish companies at different times, and governmental support measures to save businesses and jobs have been necessary. The business cost support introduced in July should, however, be adjusted to also include industries that will suffer later than in the early stages of the crisis. For example, the pandemic has had a delayed impact on manufacturing through a decrease in order backlogs,” says Jyri Häkämies, Director General of EK.
EK Business Tendency Survey
The Business Tendency Survey is published four times a year by the Confederation of Finnish Industries (EK). The survey has been carried out regularly since 1966. It is part of the European Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys, which is partially funded by the EU. The survey concerns activity in Finland.
In July 2020, the Confederation of Finnish Industries asked businesses to evaluate their business outlook for the second quarter of 2020. 1,047 companies employing nearly 250,000 people in Finland responded to the survey.