According to the Confederation of Finnish Industries’ July Business Tendency Survey, Finnish companies’ estimates of their outlooks have weakened from the spring. Business cycle expectations have now also declined again. The service sectors have been supporting the economy in recent months, whereas a downturn in construction and manufacturing has been evident for some time.
“The latest data from the business sector confirm that the economic weakness is not over yet. Although we have coped well up to now considering the circumstances, we have not yet felt the full impact of the rapid rise in interest rates on the economy. So, we must not be lulled into a false sense of security and think that the next few months will also be a breeze,” says Sami Pakarinen, Director of the Confederation of Finnish Industries.
Companies’ production and sales performance has weakened and expectations regarding the coming months are pessimistic. Sales performance has only held up in the service sectors, and this has also maintained employment in the sector. In manufacturing and construction, order books are now thinning rapidly. This will also have consequences for employment in these main sectors.
“The situation regarding employment looks worrying in the autumn. For the first time since the coronavirus pandemic, service sector companies’ expectations regarding staff numbers have also started to turn negative. Employment always follows production with a slight lag, so we will only see the effects of the slowing economy on Finland’s employment figures in the coming months,” says Pakarinen.
Insufficient demand is the biggest obstacle to growth for Finnish companies also in the summer months. As many as 44 per cent of the responding companies reported that insufficient demand was an obstacle to growth. Problems related to the availability of the labour force are also common, despite the weakening economy. This was reported by 23 per cent of the respondents. The increase in financing problems in construction is also worthy of note. Almost a fifth of construction companies reported difficulties regarding finance.
“The rapid rise in interest rates has hit demand as expected. After the sharp rise in costs, companies are now facing weaker demand. This is directly reflected in companies’ profitability estimates, which, according to the EK Business Tendency Survey, have already fallen to levels seen during the coronavirus pandemic. With so many indicators at levels seen during the financial crisis, for example, it will be a great achievement if Finland’s economy comes out of this with the forecast zero growth,” says Pakarinen.
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 2023, the Confederation of Finnish Industries asked businesses to evaluate their business outlook for the second quarter of 2023. A total of 1,019 companies employing about 235,000 people in Finland responded to the survey.