EK Business Tendency Survey: Economic recovery still awaited


Only in construction are expectations slightly improved for latter part of year

The short-term expectations of Finnish companies are still rather low. Only in construction is a small improvement in the economy expected in the second half of 2015. In manufacturing and services, the economy will continue to be flat.

According to the Business Tendency Survey conducted by the Confederation of Finnish Industries (EK) in July, manufacturing companies do not expect their output to grow in the next few months. Only at the very end of the year is a gentle rise in output anticipated. Service companies also expect sales growth to be slow in the second half of this year. In construction, the outlook has brightened a little, but in this sector too, growth in orders and output is not likely to be more than moderate.

The current economic conditions are described in all the main sectors as being weaker than average. The labour force is expected to shrink a little further in manufacturing and services.

Outlook deteriorated in manufacturing and services

In July, the general business outlook indicator for manufacturing sank to -3 (+3 in April). The latest survey showed that 8% of manufacturing companies predicted an improvement in the economy in the second half of the year, and 11% predicted a worsening.

The business outlook balance indicator for construction in July was +10 (-4 in April). Some 20% of the construction companies surveyed predicted a better outlook, and 10% the reverse.

Among service sector companies the business outlook balance indicator slid to -5 (+1 in April). In the July survey, 12% of service companies anticipated an improvement in the next six months, whereas a weakening was expected by 17% of respondents.

Only very slender growth towards end of year

In manufacturing, the number of new orders received was down marginally in April–June. A small increase in orders is expected for the next few months. In construction, the number of orders was up slightly, and this slow growth is anticipated to continue in the coming months. In manufacturing, order books remain somewhat below the normal level, while in construction the situation is described as near to normal.

Finished goods inventories in manufacturing have remained close to average. Although construction companies saw a further slight decrease in the number of unsold homes, the level was nevertheless slightly higher than average.

In manufacturing, output fell a little in April–June. This corresponded with the expectations presented in the previous survey. Output is expected to remain unchanged in the coming quarter, while for the final quarter the survey revealed that there are some growth expectations.

Construction output was up slightly in the early summer.<0} Based on seasonally adjusted figures, output is forecast to continue rising in the latter part of the year.

In services, sales remained unchanged in the second quarter. Service sector sales are expected to grow a little in the coming months. Variation within the service sector is again quite considerable.

In manufacturing, there is still a lot of unused production capacity. In July, capacity was fully utilised in 58% of the companies that responded (62% in April).

Labour force still shrinking

 In April–June, the labour force shrank further in all three main sectors. The greatest decrease was in manufacturing. The labour force is forecast to decline further in manufacturing and services in the next few months. In construction companies the labour force is likely to remain unchanged.

In manufacturing, sales prices are expected to fall slightly. In construction and services, prices are expected to remain close to their present level. The trend in costs is anticipated to be moderate in all three main sectors, with costs remaining stable or rising slightly.

 In manufacturing, profitability remained stable in the early summer and is expected to rise a little in the next few months. In construction, profitability is forecast to remain at its current level, while in services the gentle decline in profitability is expected to continue.

Demand subdued – yet construction seeing increase in recruitment difficulties

Insufficient demand is still clearly the most significant growth obstacle. Demand was felt to be slack by 45% of manufacturing companies and 45% of construction companies. Among service sector companies, 39% considered demand to be weak. Recruitment problems have clearly increased in construction (29% of respondents), while in other sectors these were minor. Financing difficulties were also of greatest significance in construction, where some 9% of companies felt that financing was a problem.

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. In July 2015, 1,140 companies employing approximately 230,000 people in Finland replied to the survey.