Regional network reports 4-2007

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Region South-West

Summary

• Growth in Region South-West remains broadly solid, but the growth rate is somewhat lower than in the previous round. The market outlook for the next six months is favourable for all business sectors, however.
• Petroleum-related manufacturing has reported very solid growth for the past few years. However, there has been a temporary negative development in the last three months, largely as a result of large projects that have peaked simultaneously. Only moderate growth is expected during the next six months.
• The solid growth in building and construction has continued also during this period. However, virtually zero growth is expected for the next six months. Despite signals of less speculation in the housing market, demand remains high. The constraint appears to be capacity.
• Solid growth continues to be reported by domestically oriented manufacturing, the export industry, services and retail trade, which are all experiencing solid to strong growth this round. Growth in the period ahead is expected to be approximately the same.
• Overall investment is expected to increase somewhat. However, growth is weaker than in the previous round, and several industries expect to reduce investment. Retail trade continues to push up the investment level in this round.
• 70% of the enterprises report some or considerable capacity problems. 64% of all contacts indicate the labour supply as a problem. Over half of the 36% who respond that the labour supply is not a problem state that it may soon become a problem.
• All industries report stable or positive employment growth in the past three months. This is expected to continue. Many companies in manufacturing and building and construction fear that the labour market is so tight that they will not be able to accomplish their employment plans.
• The average expected wage growth in 2007 is 5¾%. There are major differences between industries. Petroleum-related industry and building and construction have the highest expectations.
• In this round there has again been a considerable increase in prices for inputs.
• Selling prices continue to rise. Building and construction and corporate services are showing the strongest growth rates. On balance, the rise in prices is expected to slow in the period ahead.
• Profitability is increasing in all business sectors except domestically oriented manufacturing. However growth in margins is declining. With the exception of retail trade and corporate services, all industries are exhibiting either stable or narrower margins.