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Report from Region East

Summary

• Growth continues in Region East. All industries report solid growth during the past three months. The market outlook is positive, but our contacts expect somewhat lower overall growth in the period ahead.
• Domestically oriented manufacturing reports continued solid growth. Subcontractors to the building and construction sector as well as suppliers of interior and household furnishings report the strongest growth, as has been the case for a considerable period. The growth rate in the export industry is solid. The process industry reports high prices.
• There has been solid growth in building and construction during the last period. Growth is expected to be moderate, however, in the period ahead, primarily as a result of capacity constraints. Demand remains strong.
• Growth in retail trade remains solid. The increase in sales is most pronounced for building materials, clothing and electrical items.
• The strong growth in corporate services continues. As in the year's first round of interviews, commercial and financial services in particularly are pushing up growth. There is also solid growth in household services, including telecommunications and hotel and restaurant services.
• 52% of the companies will have problems accommodating expected or unexpected growth in demand. This is somewhat fewer than in the last round, but more than in September. Building and construction continue to have the least spare capacity.
• Employment has increased in the past three months, but growth is lower than in the three previous rounds. Employment growth has been strongest in the service sector, whereas manufacturing employment overall has declined. Companies plan to increase employment somewhat in the period ahead, although at a slower pace than we have seen for a long period. On the whole, it appears that employment growth has passed the peak, as indicated in the previous round.
• Annual wage growth in 2007 is estimated at approximately 4¾%.
• A solid rise in selling prices is reported. The rise in prices has picked up somewhat since the previous round due to a somewhat higher rise in prices for household services. In the next 12 months, 45% of our contacts expect prices to rise at a faster pace, 35% expect prices to remain unchanged, while 20% expect prices to rise at a slower pace. The share expecting prices to rise at a faster pace is higher than in the previous round. In retail trade in particular, expectations of a higher rise in prices have increased compared with the previous round.