EK Business Tendency Survey: Business cycle continued to deteriorate

There is exceptionally high anxiety in the global economy at the moment, although the worst economic fears of last autumn have dissipated. According to the Confederation of Finnish Industries’ January Business Tendency Survey, Finnish companies’ estimates of their outlooks have weakened but their expectations have improved slightly from the autumn.

“Based on the results of the business tendency survey, the Finnish economy has continued to weaken, as expected. This development is widespread, with insufficient demand affecting 40 per cent of respondents. On the positive side, last autumn’s worst fears about the economy are now less likely to materialise, due to more moderate energy prices, for example,” says Sami Pakarinen, Director, Confederation of Finnish Industries.

Companies’ expectations concerning production and sales performance have weakened. In manufacturing, order backlogs have shrunk, and in services the post-pandemic recovery phase is starting to be over. The biggest problems are in construction, where the rise in interest rates is reflected in an increase in the number of unsold homes. Expectations are not as pessimistic as they were in the autumn, although they are still low. The weakened economic situation will also be reflected in employment during the spring.

“The employment trend seems to be slowing down, based on the responses to the barometer. The weakening employment situation will have a big impact on the shape of the downturn in Finland. On the other hand, the decline in employment is partly being buffered by labour availability problems, which were reported by 25 per cent of companies,” Pakarinen says.

Now is the time for decisions

Inflation continues to be the most important global economy indicator to watch. Inflation is already slowing and the determination of central banks will continue to keep price pressures in check.

“The delay in the labour negotiations in the export sector and on the labour market in general could weaken the current business cycle even further. An outcome that ensures cost competitiveness and employment would also reassure wage earners by safeguarding their purchasing power. At the same time, it would support Finnish companies’ capacity to grow internationally and thus the success of Finland as a whole. In the face of global economic uncertainty, we must also focus on getting the fiscal outlook in order, as this is something that is in our own hands,” 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 January 2023, the Confederation of Finnish Industries asked businesses to evaluate their business outlook for the fourth quarter of 2022. A total of 1,133 companies employing about 250,000 people in Finland responded to the survey.