EK Business Tendency Survey: Business cycle remained weak

According to the Confederation of Finnish Industries’ April Business Tendency Survey, Finnish companies’ estimates of their outlooks have remained weak but expectations have continued to improve slightly. Although inflation is already starting to slow, the full impact of the rapidly rising interest rates on economic development has not yet been felt. From the global economy’s perspective, there is still no certainty of how soft the landing will be.

“In Finland, companies felt that the economic situation had remained weak during the spring. Although expectations are no longer as pessimistic as they were in winter, economic growth is not yet on a steady footing. We are approaching a traditional economic cycle, where construction and manufacturing are weakening first, while services are still somehow holding their own,” 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. Among the main sectors, the biggest problems are being experienced in construction, where the rise in interest rates is causing a marked fall in demand. In manufacturing, order backlogs have continued to thin out, but demand for services has maintained the employment trend.

“The biggest obstacle to growth continues to be insufficient demand, which was reported by 41% of the responding companies. Lack of demand is affecting companies in all sectors. Construction has been hit hardest, as 63% of companies reported too little demand. The last time the level was higher than this was during the financial crisis in 2009,” says Pakarinen.

Although demand is dwindling, there is still a shortage of skilled labour

The economic slowdown has not had a significant impact on the challenges companies face in finding skilled labour. In the April Business Tendency Survey, 26% of respondents still reported problems with the availability of labour. Services, in particular, have sustained the employment level and service sector companies have experienced more problems with the availability of labour than the other main sectors.

“The labour force is expected to decline over the coming months, but companies are also in need of skilled labour. Companies have taken action to solve this problem and have started to recruit more and more workers from abroad. Based on preliminary data from last year, the number of arrivals from Asia in particular have increased. The success of work-based immigration is a matter of life and death for Finland,” 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 April 2023, the Confederation of Finnish Industries asked businesses to evaluate their business outlook for the first quarter of 2023. A total of 1,111 companies employing about 250,000 people in Finland responded to the survey.