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National Report

Summary

Demand and output

All industries report continued solid growth. Overall, growth is marginally higher than in the previous round. The market outlook for the next six months is roughly the same as in the previous round and overall growth is expected to be solid in the period ahead. However, most industries also report that capacity limits and labour shortages are a constraint to further growth.

Compared with the previous round, growth is stable in import-competing manufacturing and building and construction, but is slowing somewhat in the export industry and the service industry. Growth is picking up in retail trade and among suppliers to the petroleum industry.

Within the export industry, there is solid growth in the process industry, fish farming and oil and energy-related enterprises. Domestically oriented manufacturing reports solid growth in all regions and in many industries. Building-related manufacturing reports particularly strong growth. The strong growth among suppliers to the petroleum industry indicates that growth in this industry is broadly based and does not depend solely on large projects such as Snøhvit and Ormen Lange which will soon be completed. A shortage of labour and building materials in the building and construction sector continues to limit growth somewhat. Reports from a number of regions indicate that commercial building is replacing residential construction as the most important driver of growth. Retail trade reports the strongest sales growth for furniture, clothing, footwear, sports equipment, cars and electrical products. In the service industry, growth is also related to a wide range of areas in the corporate and household markets. Growth is strongest in commercial and financial services.

Capacity utilisation and supply of labour

63% of companies report that they would have some or considerable difficulty in accommodating an expected or unexpected increase in demand, while 52% report that the supply of labour would limit output growth if demand increased. These percentages are only marginally lower than in the previous round. As in previous rounds, building and construction, where labour shortages are most pronounced, report the highest capacity utilisation. Many contacts in the manufacturing sector mention physical constraints such as technical production capacity and the supply of raw materials and other deliveries in addition to labour shortages. Enterprises still have plans to increase investment but at a slower pace than observed earlier in the upturn.

Employment and the labour market

There is solid growth in employment and growth is somewhat higher than in the previous two interview rounds. The service sector reports the strongest growth. Employment is expected to increase at approximately the same pace during the next three months.

Costs, prices and profitability

The projection for annual wage growth is 5% as a weighted average, compared with 4¾% in the second round of interviews in March and 4½% in the first round in January/February. This is approximately 1 percentage point higher than the projection for 2006 made at the same time last year. Building and construction and the service industry expect the highest wage growth.

Some industry segments report a considerable increase in the price of intermediate goods. This is particularly the case for manufacturing, which relies on intermediate goods from global commodity and industrial goods markets, and building and construction. For large segments of retail trade, purchase prices are still stable, are rising slightly or are falling.

There has been a solid rise in selling prices during the past 12 months, the sharpest rise we have registered so far in the network. Building and construction, corporate services and domestically oriented manufacturing once again report the sharpest rise in prices.

In the next 12 months, 26% of our contacts expect a higher rise in prices, 52% expect prices to rise at the same pace, while 22% expect a lower rise in prices. Expectations of a sharper rise in prices are somewhat lower than in the previous round and are now at the level prevailing at the beginning of 2006. On average, enterprises in building and construction, domestically oriented manufacturing and the service industry expect a higher rise in prices, whereas enterprises in retail trade and the export industry that expect a lower rise in prices outnumber enterprises that expect a higher rise in prices.

For the business sector overall, profitability developments have been moderately positive. Domestically oriented manufacturing and building and construction report the most substantial increase in profitability.