EK Business Tendency Survey: No clear improvement in sight yet

06.05.2015

Finnish companies’ expectations for the summer and early autumn remain cautious. The general business outlook has improved slightly compared with the previous survey, but no significant improvement is expected yet. In construction, the outlook remains slightly negative.

According to the Business Tendency Survey conducted by the Confederation of Finnish Industries (EK) in April, manufacturing companies are rather cautious in their order and output forecasts for the next few months. However, there are moderate growth expectations for the late summer and autumn. In services, the sales trend was weak but the decline is expected to end within the next three months. The service sectors also expressed cautious growth predictions for the third quarter.

The current situation is weaker than normal in all the main sectors, and is said to have improved only marginally during the first quarter. The labour force will continue to shrink in all the main sectors.

Slight improvement in business outlook – no clear improvement is foreseeable yet

In April, the general business outlook balance indicator for manufacturing in the coming months rose to +3 (-4 in January). In the most recent survey, 13% of manufacturing companies expected the economy to improve in the next six months, whereas 10% anticipated a worsening of the situation.

The business outlook balance indicator for construction was -4 in April (-21 in January). In all, 13% of respondents expected the economy to improve, whereas 17% anticipated a worsening of the situation.

In April, the business outlook balance indicator for services rose to +1 (-12 in January). In the April survey, 18% of service companies predicted an improvement in the next six months, and 17% of companies predicted a decline.

Output expectations for next few months lacklustre, slightly improved outlook for autumn

The number of new orders received in manufacturing was slightly lower in January–March than in the final quarter of last year. A fairly steady flow of orders is forecast for the coming months. The decline in construction orders is also forecast to end in late spring. In both manufacturing and construction, order books remain somewhat below the normal level.

Finished goods inventories in manufacturing have remained close to average. Although construction companies saw a slight decrease in the number of unsold homes, the level remained quite high.

In manufacturing, output remained unchanged in January–March. The coming months are expected to be flat, as output may even decline slightly. However, there are moderate growth expectations for the late summer and autumn. In construction, output remained fairly stable and no major changes are anticipated in the coming months. Sales in services have also been shrinking. However, the decline is anticipated to end in the coming months, and there are some growth expectations for the third quarter. Variation among the different service sectors is quite considerable, however.

Manufacturing companies’ capacity utilisation continues to be lower than the long-term average. In April, 62% of respondents indicated that their production capacity was fully utilised (65% in January).

Labour force still suffering from general decline

The number of employees fell in all three main sectors in January-March. The number of employees is expected to continue falling also during the late spring and early summer.

Sales prices are expected to stop falling in the next few months in both manufacturing and services. In construction the decline in prices is expected to continue. Cost development is expected to be moderate: costs are expected to fall slightly in manufacturing and construction, and to rise fairly slowly in the service sectors.

Profitability expected to remain stable

Profitability remained fairly stable in manufacturing companies, and no change is expected in the coming months. Profitability is forecast to remain at its current level also in construction, while in the service sectors the gentle decline is expected to continue for the next few months.

Insufficient demand is still clearly the most significant obstacle to business growth. Demand was felt to be slack by 42% of manufacturing companies, 57% of construction companies and 41% of service sector companies. Reported recruitment difficulties were fairly minor, with the exception of some of the service sectors. Financing difficulties, on the other hand, became more widespread in the construction sector, where such problems were reported by 15% of respondent companies.