Summary

• There have been small, but positive changes in activity levels since the last reporting period. Growth was most substantial in retail trade and the household service sector.
• Manufacturing industry's domestic and export markets have improved slightly. However, demand is still falling for the petroleum industry.
• The building and construction sector reports improvements, especially in the number of new orders.
• Employment continues to fall in all sectors except retail trade, but the fall appears to be levelling off.
• The business sector is somewhat more positive in its investment plans. However, investment is aimed to a large extent at improving efficiency and quality and seldom at increasing capacity.
• Due to workforce reductions and other cost-cutting measures, developments in operating margins are more positive.

Region South-West

• In this interview round we received a clear impression that interest rate cuts and the depreciation of the krone against the euro have created greater optimism in many industries. A rise in unfilled orders for manufacturing and construction industries is attributed to these developments.
• However, a stable, high oil price has not resulted in many big orders for the supplier industry. Oil companies appear to be investing less in the North Sea, and are continuing to squeeze the margins of the supplier industry.
• Strong growth in activity has been recorded for retail trade. Retail sales are very sensitive to changes in consumer sentiment, and the most recent interest rate reduction probably increased consumer spending.
• The positive signals of the last few months have not yet resulted in any extensive degree of new jobs in any sectors except retail trade.
• Reports have been received of several large planned - or recently executed - staff cutbacks. As a rule these are due to restructuring designed to improve efficiency within groups of companies, or consolidation following mergers.
• Willingness to invest has improved, but is still low in all sectors.
• With rising unemployment the supply of labour will improve. It is difficult to find capable employees for physically demanding work.
• Wage growth is generally low - as may be expected in a period of rising unemployment.
• Many companies with production/sale of standardised goods and services report growing demand and good margins despite falling prices. For these businesses, falling prices may be an indication of growth in volume and product development - not a decline in demand.
• Margins have improved somewhat in the export industry, retail trade and in construction, but not in service industries or domestically oriented manufacturing.

 Region South

• An assessment of developments in the business sector reflects careful optimism.
• So far, the depreciation of the krone has not significantly changed the activity level and order situation for export companies, but exchange rate developments in isolation are improving the export industry's margins.
• Domestically oriented manufacturing reports improved competitiveness in relation to foreign market operators.
• Developments in employment are fairly stable, following substantial workforce reductions in a number of enterprises. There are only a few enterprises with plans to increase the workforce in the future.
• Willingness to invest is low. The investments which are being planned are seldom geared towards increasing capacity. The primary purpose of investment is to improve efficiency and quality.
• Price and cost developments have been stable in the period.

 Region East

• There is a strong focus in both manufacturing and private services on increasing profitability on the basis of the current demand situation. Few of the contact firms assume that profitability will increase through growth. The general aim of the investments that are being made is to improve operating efficiency, and few companies are planning to increase their workforce in the near future.
• Demand for goods and services from domestically oriented manufacturing shows a weakly negative tendency. The supplier industry for maritime industries and the building industry is still experiencing a decline in demand and output, while energy sector demand for capital goods is increasing somewhat.
• The export industry reports weakly positive demand tendencies. These can be attributed primarily to niche firms, which are competitive even with a relatively high cost level. Manufacturing industry with more standardised products is not receiving much stimulus from market growth, and has little ability to win market shares. Nevertheless, the situation is perceived as somewhat improved. This is partly because the krone has depreciated and partly because companies' costs are now better adapted to the demand situation.
• The picture of a sharp fall in activity for commercial buildings, a less pronounced fall for housing and satisfactory growth in the construction sector is confirmed in this round.
• Demand for services for the business sector continues to fall, but more contacts than previously report no change, and that the bottom has been reached. After a long period of substantial cost cutting and rationalisation measures, results also seem to be improving.
• Growth in household demand is high. In retail trade, demand for consumer non-durables is increasing appreciably. Following a weak start to the year, turnover of consumer durables has also picked up substantially. Growth in services for households is somewhat more moderate.
• Contacts in the public sector report stable employment and an unchanged investment level from 2002 to 2003.

 Region North-West

• The bottom appears to have been reached, and there are positive signals from the business sector. Strong competition and excess capacity are restraining prices. Low prices lead to continued focus on cost cuts/productivity improvements and mean that it will take time before employment rises.
• The export industry is beginning to benefit from the weaker krone, but the shipbuilding industry still lacks orders. The fish-farming industry has been experiencing a severe crisis in this past period with prices dipping to well below cost. Recently (weeks 35-36) prices have risen to a level which provides a small contribution margin to the most efficient businesses, but the problems are not yet over.
• Domestically oriented manufacturing shows positive signs, but the segment that subcontracts to export-oriented manufacturing is still experiencing weak demand.
• Travel and tourism have experienced a slow season, reflecting the effects of international events and weak demand from the regional business sector. This has been offset to some extent by Norwegian tourism, and turnover as a whole has not been as low as feared.
• It appears that it will take some time before business investment picks up. Banks are very risk-averse in relation to the business sector, and there is a risk of a credit squeeze in the longer term. Commercial buildings still have excess capacity, and competition is growing. Prices in building and construction are falling, but the low interest rate is expected to lead to a gradual increase in activity.
• Household demand is growing in particular. Retail trade is improving steadily. Demand for consumer durables and loans to households are increasing sharply. As a result of generally strong competition and large stocks of some products, the rise in prices in retail trade as a whole is expected to remain low.

 Region North

• A slight rise in demand for certain species and products was noted for the fishing industry of Region North during the last period, and positive developments are expected to continue. However, this does not apply to bulk products of white fish like frozen filets and salted fish.
• Industries that supply goods and services to the fishing and fish- farming industries are still experiencing a decline in demand and production, however, and some businesses only have service orders.
• Growth in sales of consumer goods is continuing in retail trade. Demand for capital goods is still subdued, but the situation is expected to improve because of low interest rates. Demand for building and construction remains low, but varies somewhat from region to region. Household demand for services has edged up, while business sector demand has declined slightly since the previous round.
• We see some signs of increased investment willingness on the part of retail trade and services. Manufacturing shows little willingness to invest because of the general uncertainty prevailing in this sector. Some business segments, both private and public, still see a need to improve efficiency by restructuring and reducing staff.
• Selling prices show the same features as in previous periods, with falling prices in retail trade. Prices for export-oriented manufacturing continue to fall, but there are signs that the fall is beginning to level off.
• Competition, either domestic or international, is cited as the most important factor influencing prices for companies' products and services. In manufacturing, the strong competition encountered from low-cost countries is mentioned in particular.

 Region Central Norway

• Manufacturing output has increased slightly in the last quarter.
• During the last quarter, the growth rate in retail trade has risen and is now well over 3 per cent.
• There are now large regional differences within the building and construction sector. Activity in densely populated areas is brisk. Public sector projects now account for a stable and unusually large share of activity in this industry.
• Competition is more intense than previously in most markets. This is partly due to increased imports in some industries, more price- conscious customers, increased focus on price in relation to quality, and increased retail trade capacity.
• The intense competition that dampens the rise in prices contributes to maintaining the focus on improving efficiency and reducing costs. This affects services for the business sector.
• Our overall evaluation is that the economy is growing slowly, largely as a result of growth in retail sales. But growth is so weak that overall employment continues to decline. Few businesses are increasing their number of employees. The growth in output is a result of increased productivity.

 Region Inland

• Demand and output for domestically oriented manufacturing in the counties of Hedmark and Oppland have been stable or slightly rising. Higher disposable income has led to increased demand/output in the building and construction sector, especially in the rehabilitation market. There is growth in all regions in the counties of Hedmark and Oppland. The industries expect the same developments ahead.
• Companies providing services to the business sector are experiencing rising demand, especially in the ICT and financial services sectors.
• Employment has been stable in most industries. Employment is also expected to be stable in the future as a result of reduced wage costs and a stable or slightly increasing level of new orders. The public sector expects stability in the short term, but over time expects a slight reduction in the workforce due to tighter budgets.
• The supply of qualified labour is somewhat higher than normal in most industries and especially in the retail sector and manufacturing.
• The retail and service sectors report that the investment rate ahead will be virtually unchanged. Due to increased competition, both in Norway and abroad, manufacturing must maintain or increase investment in production equipment and product development.
• Profitability is rising slightly. This development may be explained by a combination of increased output/demand, the effects of productivity-enhancing measures, a relatively moderate wage settlement and lower financing costs.
• The slow rise in prices the last few years is primarily due to increased competition. The competitive situation requires more highly processed products and more automated production processes in manufacturing.