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National Report Regional Network - April 2003

Møreforskning Molde

In this round, which was conducted in March-April 2003, a total of 223 contacts in the regional network were interviewed. The following main points are based on the regional reports:

• Output and demand in export-oriented manufacturing are still falling, but developments are not as negative as in the previous period.
• The export industry's subcontractors are still struggling, but the signals are somewhat less negative than in January-February.
• Moderate growth continues in the consumer goods industry and in retail trade. Developments are weaker for consumer durables than for consumer goods.
• Developments in the petroleum industry are mixed. The activity level in the areas of exploration and development of new fields is low and falling, while the operations and maintenance market is growing.
• The impact of weaker economic developments is spreading to the construction industry. There is evidence of a slight decline in output this year and the volume of new orders is reported to be low. Previous years' high investments in buildings (particularly commercial buildings) with subsequent overcapacity are amplifying this negative trend.
• Companies supplying services to the business sector are experiencing a period of contraction with a continuing decline in demand and output. For companies supplying services to households, growth in demand seems to have stagnated in the first quarter.
• The primary focus in most sectors and particularly in manufacturing is still on cost and workforce reductions. The exception is retail trade where employment remains stable.
• This round of interviews supports expectations of considerably lower wage growth in 2003 than in 2002. Increasing unemployment and weak market and profitability trends in a number of business sectors contribute to this. Many will not offer local pay increases, but the carry-over and centralised pay increases set a lower limit for this year's wage growth. In 2003, annual wage growth is expected to be 3.5 per cent in manufacturing, 4 per cent in the service sector and 4.5 per cent in the public sector.
• Norges Bank's 1.5 percentage point reduction in the interest rate since December has had a positive impact on financing costs for a number of sectors, but so far has had little effect on the business sector's desire to invest. Many contacts mention that interest rate reductions will have a general, positive effect on demand, but that for the present this effect is overshadowed by other factors, such as high electricity prices, increased unemployment and an uncertain global situation. The interest rate reductions have contributed to maintaining household credit growth.