Economic situation and outlook

Transcription

1 Economic situation and outlook ELECTRONICS AND ELECTROTECHNICAL INDUSTRY MECHANICAL ENGINEERING METALS INDUSTRY CONSULTING ENGINEERING INFORMATION TECHNOLOGY Global and Finnish Economic Outlook Better growth outlook in Western Europe pg. 3 Technology Industries in Finland New orders above last year s level, positive tender-request development continued in early 214 pg. 5

2 Contents Global and Finnish Economic Outlook... 3 Technology Industries in Finland... 5 Electronics and Electrotechnical Industry in Finland... 6 Mechanical Engineering in Finland... 7 Metals Industry in Finland... 8 Consulting Engineering in Finland... 9 Information Technology in Finland... 1 Personnel Development Economic situation and outlook 2/214

3 Global and Finnish Economic Outlook Better growth outlook in Western Europe Global economic growth has picked up somewhat in recent months, particularly according to the latest indicators from developed economies, such as those in North America and Western Europe. On the other hand, in many developing countries, including China, growth is slowing down. The Russian economy has entered a recession. In April, the International Monetary Fund IMF raised its global economic growth forecast for 214. According to the most recent forecast, the global economy is expected to grow by 3.6 per cent, while, according to preliminary data, it grew by 3. per cent in 213. Growth is projected in all geographic areas, but not without the risk of the growth being subdued. Measured by the share of exports of technology companies operating in Finland, global demand will grow by 2.4 per cent in 214. Most positive for exports is the recovery in Western Europe, although the growth rate is only 1.3 per cent measured by GDP. However, considering the recovery of some three per cent in North America and Eastern Europe, the overall outlook for Finnish exports is cautiously optimistic. As regards the risks related to projected economic development in 214, it is important to note that China alone accounts for one-third of global economic growth, while all developing countries account for almost 7 per cent. Central banks are normalising their monetary policies after the financial crisis, tightening financing markets in many developing countries. Investments in these countries will not develop as favourably as in the past few years. Deepening recession in Russia will have significant impacts in Finland The recession in Russia and the volatile situation in Ukraine have many negative effects on the Finnish economy. In addition to falling revenue from tourism, exports from Finland to Russia are already shrinking. Technology industry exports from Finland to Russia amounted to EUR 2.3 billion, or nine per cent of the total, in 213. They already fell by six per cent year-on-year in 213. As the crisis in Ukraine spreads, it is likely that technology industry exports to Russia will drop by double-digit percentages. Technology industry companies will also face many indirect effects. These developments will also have a strong impact on those Finnish companies that operate in Russia and Ukraine. Finnish technology industry companies currently employ some 7, people in their subsidiaries in Russia and in excess of 1, people in Ukraine. 3 Economic situation and outlook 2/214

4 Successful manufacturing operations required to drive growth of services exports In comparison to the pre-crisis level of 28, the monetary value of Finnish exports is currently 15 per cent lower, or EUR 1 billion short of the annual level. Competing economies have fared much better, making this an unprecedented drop in the level of exports. Germany s exports are 18 per cent, Belgium s nine per cent and Sweden s two per cent higher than in 28. The monetary value of exports in euros is up by 38 per cent in Estonia and 27 per cent in Poland. The share of Finnish exports in GPD has dropped by as much as seven per cent points since 28. At the moment, it is only 4 per cent, while in Germany, the percentage is more than 5 and in Sweden, 46 per cent. The drop in the level of Finnish exports since early 28 is due to reduced levels of industrial manufacturing. Lacking in competitiveness, the Finnish operating environment and its products have failed to maintain the pre-crisis levels of industrial manufacturing. The electronics industry accounts for around half of the drop in exports, mechanical engineering (machinery, metal products and vehicles) for about one-third and forestry for most of the remainder. Overall, the drop in the level of exports has had a widespread effect on many industrial sectors. While services exports from Finland have not dropped as dramatically since 28, they have not grown either. The level of services exports has remained relatively unchanged for the past five years. As expected, the export of services has not been able to compensate for the drop in the export of goods. Downward trend in the export of industry services Services exports originate from many sources. Business services include services such as inter-company services. In the export of IT services, gaming industry products and other software products have been growing recently. Global inter-company services exports also generate revenue in Finland by means of royalties and licence fees. Other services mainly include revenue from tourism, transport and financing services. As regards the structure of services exports from Finland, it is important to note that industrial sectors account for a significant portion of them. Even today, they account for 7 to 8 per cent. However, levels in the export of industrial sector services have experienced a downward trend since 28. Without the recent growth in the gaming industry, the export of services as a whole would have dropped. The structure of Finnish services exports leads to an important conclusion: successful manufacturing operations are required in Finland to prevent shrinking services exports. Despite the software industry s potential for further growth, development in the export of services should not rely on the gaming industry alone. World Economic Growth Forecasts in 214 GDP growth in 214, % Average growth: +3,6 % North America Western Europe Japan China India Rest of Asia Russia Rest of Eastern Europe The width of the bar indicates the share (purchasing power parity adjusted) of world GDP in 213, % Source: IMF (April 214) Brazil Mexico Rest of Latin America Middle East, Africa World Economic Growth Forecasts in 214 with the Export Shares GDP growth in 214, % Average growth: +2,4 % North America Western Europe Japan China India Rest of Asia Russia Rest of Eastern Europe Brazil Mexico Rest of Latin America Middle East, Africa The width of the bar indicates the export share of technology industry from Finland in 213, % Source: IMF (April 214), Board of Customs Export of Services Has Not Compensated for the Drop in Export of Goods Value of goods and services exports per quarter, EUR billion, at current prices Export of goods from Finland Export of services from Finland Working day and seasonally adjusted time series. Latest information: October-December 213. Source: Satistics Finland, National Accounts Downward Trend in the Export of Industry Services Export of services from Finland, excluding transport and tourism and financing Export of industry services from Finland 21 Source: Statistics Finland, International trade in services Export of other services from Finland 4 Economic situation and outlook 2/214

5 Technology Industries in Finland New orders above last year s level, positive tenderrequest development continued in early 214 The turnover of companies in the Finnish technology industries fell by some five per cent in 213, to EUR 64.2 billion. In January 214, turnover was three per cent lower than twelve months earlier. The turnover of the main industries took a downward turn, except for information technology and consulting engineering. In 28, prior to the financial crisis, the Finnish technology industry recorded a turnover of EUR 82 billion. Positive development continued in early 214. It seems that the increased tender-request volume reported by companies in January has resulted in an increase in new orders. The volume of tender requests increased further between January and April, indicating that this upward trend will continue. However, there were major differences between sectors and especially between individual companies. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between January and March was seven per cent higher than in the corresponding period of 213, but slightly lower than in the preceding quarter. Of the respondents, 49 per cent said the number of new orders had increased since December, 44 per cent said it had decreased and seven per cent said it had remained stable. At the end of March, the value of order books was two per cent lower year-on-year and slightly above the value reported at the end of December. 51 per cent of respondents said their order books had increased in size since December, while for 37 per cent they had reduced and for 12 per cent remained stable. Based on the order trends in recent months, the turnover of technology industry companies is expected to remain relatively unchanged over the next few months from the level reported for the corresponding period last year. Turnover of the Technology Industry in Finland = 1 Change: 1,214 / 1,213, % Seasonally adjusted turnover index, latest information 1/214. Source: Statistics Finland -6 % Value of New Orders in the Technology Industry* in Finland Domestic Export Combined Change: I,214 / I,213 I,214 / IV,213 Export: +5 % -8 % Domestic: +13 % +22 % Combined: +7 % -1 % 214 *) Excluding metals industry and game industry companies. latest information January-March 214 Value of Order Books in the Technology Industry* in Finland Domestic Export Combined Change: / / Export: -5 % -2 % Domestic: Combined: +6 % -2 % +11 % +1 % *) Excluding metals industry and game industry companies. latest information Tender Requests* Received by Technology Industry Companies Balance figure Have you experienced a notable increase or decrease in the number of requests for tenders in recent weeks in comparison to the situation three months ago?. Balance figure = the number of companies receiving more requests - the number of companies receiving less requests. Source: The Federation of Finnish Technology Industries order book survey, latest information: April Economic situation and outlook 2/214

6 Electronics and Electrotechnical Industry in Finland Copyright Okmetic Downward trend in new orders continued The turnover of companies in the Finnish electronics and electrotechnical industry (telecommunications equipment, electrical equipment and instruments) fell by some 12 per cent in 213, to EUR 14.3 billion. In January 214, turnover was eight per cent lower than twelve months earlier. In 28, prior to the financial crisis, the corresponding figure for the Finnish electronics and electrotechnical industry was EUR 27 billion. The situation in the telecommunications equipment sector remained challenging between January and March. As a result, the downward trend in the volumes of new orders and order books in the electronics and electrotechnical industry as a whole continued. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders in the industry between January and March was five per cent lower than in the corresponding period last year, and 21 per cent lower than in the preceding quarter. At the end of March, the value of order books was seven per cent less year-on-year and 18 per cent below the value reported at the end of December. Based on order trends in recent months, the turnover of companies in the electronics and electrotechnical industry is expected to remain below last year s level over the next few months.. Value of New Orders in the Electronics and Electrotechnical Industry in Finland Domestic Export Combined Change: I,214 / I,213 I,214 / IV,213 Export: -5 % -25 % Domestic: -4 % +3 % Combined: -5 % -21 % latest information January-March 214 Value of Order Books in the Electronics and Electrotechnical Industry in Finland Combined Domestic Export Change: / / Export: -6 % -21 % Domestic: -17 % +22 % Combined: -7 % -18 % latest information Economic situation and outlook 2/214

7 Mechanical Engineering in Finland Copyright Harvia Value of New Orders in the Mechanical Engineering in Finland Domestic Export Combined Change: I,214 / I,213 I,214 / IV,213 Export: +19 % +22 % Domestic: +46 % +35 % Combined: +24 % +24 % latest information January-March 214 Value of Order Books in the Mechanical Engineering in Finland Combined Domestic Export Change: / / Export: -4 % +9 % Domestic: +1 % +15 % Combined: -2 % +1 % latest information New orders and order books picked up The turnover of companies in the Finnish mechanical engineering (machinery, metal products and vehicles) fell by five per cent in 213, to EUR 26.5 billion. In January 214, turnover was five per cent lower than twelve months earlier. Turnover decreased in the manufacturing of machinery and metal products, but increased notably in the manufacturing of vehicles. In 28, prior to the financial crisis, the corresponding figure for the Finnish mechanical engineering was EUR 32 billion. The number of new orders and order books increased between January and March, although the value of order books remained slightly lower in March than twelve months earlier. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders in the industry between January and March was 24 per cent higher than in the corresponding period last year, and 24 per cent higher than in the preceding quarter. At the end of March, the value of order books was two per cent lower year-on-year, but 1 per cent above the value reported at the end of December. Judging from order trends in recent months, the turnover of mechanical engineering companies is expected to remain at last year s level over the next few months. 7 Economic situation and outlook 2/214

8 Metals Industry in Finland Copyright Boliden Turnover burdened by price development The turnover of companies in the Finnish metals industry (steel products, non-ferrous metals, castings and metallic minerals) fell by seven per cent in 213, to EUR 9.5 billion. In January 214, turnover was 12 per cent lower than twelve months earlier. In 27, prior to the financial crisis, the corresponding figure for the Finnish metals industry was EUR 12.7 billion. Between January and February, production of steel products, non-ferrous metals, castings and metallic minerals in Finland increased slightly year-on-year. The production of steel, non-ferrous metals and castings increased, while the production of metallic minerals shrank. Global steel production grew three per cent year-on-year between January and March. Production volumes increased by seven per cent in the EU, were unchanged in Russia but shrank by 1 per cent in Ukraine. Production increased slightly in North America and was up by three per cent in Asia. China is by far the biggest producer and accounted for 5 per cent of global steel production in March. Turnover of the Metals Industry in Finland = 1 Change: 1,214 / 1,213, % Seasonally adjusted turnover index, latest information 1/214. Source: Statistics Finland Production Volume of the Metals Industry in Finland = 1 13 Change: 1-2,214 / 1-2,213, % % % Seasonally adjusted volume index, latest information 2/214. Source: Statistics Finland 8 Economic situation and outlook 2/214

9 Consulting Engineering in Finland Copyright Ramboll Value of New Orders in the Consulting Engineering in Finland Domestic Export Combined Change: I,214 / I,213 I,214 / IV,213 Export: -11 % -9 % Domestic: +11 % +5 % Combined: +8 % +3 % latest information January-March Combined Value of Order Books in the Consulting Engineering in Finland 214 Domestic Export Change: / / Export: -1 % -3 % Domestic: +18 % +1 % Combined: +15 % +8 % latest information Positive development in orders continued The turnover of companies in the Finnish consulting engineering (industrial, social and construction expert services) increased by two per cent in 213, to EUR 5.5 billion. In January 214, turnover was five per cent higher than twelve months earlier. In 28, prior to the financial crisis, the corresponding figure for the Finnish consulting engineering was EUR 5.4 billion. The development of both new orders and order books continued to be mainly positive between January and March. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between January and March was eight per cent higher than in the corresponding period of 213 and three per cent higher than in the preceding quarter. At the end of March, the value of order books was 15 per cent higher year-on-year, and eight per cent higher than at the end of December. Industrial expert services were the only exception to the overall positive development, reporting a reduction in order books of one-third year-on-year and also from the preceding quarter. Export orders in the sector shrank by eight per cent from the level reported in the preceding quarter and by 15 per cent year-on-year. In twelve months, the share of the industrial sector of the entire value of new orders has dropped from some 25 per cent to less than 19 per cent. Judging from order trends in recent months, the turnover of consulting engineering companies is expected to be higher in the coming months than in the corresponding period last year. 9 Economic situation and outlook 2/214

10 Information Technology in Finland Copyright IBM Positive turnover development continues The turnover of companies in the Finnish information technology sector (IT services and software) increased by 11 per cent in 213, totalling EUR 8.4 billion. In January 214, turnover was 11 per cent higher than twelve months earlier. Software companies in the gaming sector in particular reported higher turnovers. In 28, prior to the financial crisis, the corresponding figure for the Finnish information technology sector was EUR 6.5 billion. Positive order development continued between January and March. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders in the industry between January and March was five per cent lower than in the corresponding period last year, but seven per cent higher than in the preceding quarter. At the end of March, the value of order books was six per cent higher year-on-year, and seven per cent higher than at the end of December. Judging from order trends in recent months, the turnover of information technology companies is expected to be higher in the next few months than in the corresponding period last year. Value of New Orders in the Information Technology in Finland* Change: I,214 / I,213 I,214 / IV,213 Combined: -5 % +7 % *) Excl. game industry companies. latest information January-March 214 Value of Order Books in the Information Technology in Finland* Change: / / Combined: +6 % +7 % *) Excl. game industry companies. latest information Economic situation and outlook 2/214

11 PERSONNEL DEVELOPMENT Decreasing staff numbers abroad and in Finland in 213, mechanical engineering continues to increase international staff Finland-based technology industry companies reduced their international staff by some five per cent in 213, whereas domestic personnel fell by some 2.5 per cent. In 213, Finnish companies employed a total of 581, people, 296, in Finland and 285, abroad. The number of staff in foreign subsidiaries fell in all other industries except mechanical engineering. Technology industry staff numbers fell the most in developed countries, by eight per cent on average. In Western Europe, staff numbers fell by some nine per cent and in North America by four per cent. As much as 65 per cent of all staff employed by Finnish companies abroad are located in emerging regions: Asia, Africa, the Middle East, Central and Eastern Europe and Latin America. The number of personnel in these countries grew by almost 14, people over the last 13 years. However, the number fell by 6, in 213. The largest concentrations of foreign subsidiaries in 213, measured by number of staff, are as follows: China (57,4), India (34,8), United States (22,6), Germany (19,1), Sweden (16,), Mexico (14,7), Brazil (12,7), Poland (9,6), United Kingdom (7,2) and Russia (6,9). In Finland, technology industry companies reduced their staff by approximately 7,3 people in 213. Since 28, the total number of staff has dropped by 31,. According to the Federation of Finnish Technology Industries quarterly survey, the downward trend in personnel numbers continued between January and March 214. All in all, staff numbers shrank by approximately 2.5 per cent from the 213 average. At the end of March, the industry employed 288, people in Finland. The structural changes over the last few years reflect intensifying price competition. To maintain their competitiveness, companies have shifted their production and services towards emerging markets and countries with low labour costs. On a global scale, these changes are expected to continue over the next few years. Personnel in the Technology Industry Technology Industry Personnel in Subsidiaries Abroad (31.3) Personnel in Finland Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey Western Europe North America Asia and Oceania Central and Eastern Europe The Middle East and Africa Latin America Source: The Federation of Finnish Technology Industries labour force survey Technology Industry Personnel in Subsidiaries Abroad Western Europe and North America Asia, Oceania, Eastern Europe and Latin America The Middle East and Africa Source: The Federation of Finnish Technology Industries labour force survey *) In March April 214, the Federation of Finnish Technology Industries conducted a survey of the number of international staff employed by its member companies at the end of 213, by country. Member companies of the Federation of Finnish Technology Industries account for around 8 to 9 per cent of all technology companies operating in Finland, measured by turnover. Foreign subsidiaries are companies in which the Finland-based parent company has a share of at least 5 per cent. The number of international staff can increase by way of company acquisitions, the expansion of operations or raising the percentage of ownership. The number of staff in Finland by the end of March 214 was investigated as part of the quarterly survey. Information on suspensions and temporary employment was gathered separately. 11 Economic situation and outlook 2/214

12 PERSONNEL DEVELOPMENT Electronics and Electrotechnical industry Finnish electronics and electrotechnical industry companies employed a total of 171, people in 213. About 124, employees worked in international subsidiaries and 47, in Finland. The number of international staff fell by some 1 per cent in 213. In 2, the industry had 63, employees in Finland and 55, in subsidiaries abroad. As much as 8 per cent of all staff employed by Finnish companies abroad are located in emerging regions: Asia, Africa, the Middle East, Central and Eastern Europe and Latin America. The number of personnel in these regions has grown by 75, over the last 13 years. However, the number fell by some 1, people in emerging areas in 213. Between January and March 214, electronics and electrotechnical industry companies decreased their personnel in Finland by one per cent from the average in 213. At the end of March, the industry employed 46, people in total. Mechanical Engineering Finnish mechanical engineering companies employed a total of 249, people in 213. About 116, employees worked in international subsidiaries and 133, in Finland. In the reference year 2, staff numbers were 13, in Finland and 62,5 abroad. During 25 28, international staff grew by almost 5 per cent (35, new employees) due to investment projects and corporate restructuring, but fell by almost six per cent in 29. During , the number of international staff grew by 12 per cent. In 213, the number of mechanical engineering staff continued to grow abroad, increasing by three per cent. In Finland, staff numbers were reduced by some three per cent. Some half of all international staff employed by Finnish mechanical engineering companies are located in the developed countries of Western Europe and North America. Between January and March 214, mechanical engineering companies decreased their personnel in Finland by four per cent from the average in 213. At the end of March, the industry employed 127, people in total. Personnel in the Electronics and Electrotechnical Industry Personnel in the Mechanical Engineering (31.3) Personnel in Finland Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey (31.3) Personnel in Finland Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey Electronics and Electrotechnical Industry Personnel in Subsidiaries Abroad Mechanical Engineering Personnel in Subsidiaries Abroad Western Europe North America Asia and Oceania Central and Eastern Europe The Middle East and Africa Latin America Western Europe North America Asia and Oceania Central and Eastern Europe The Middle East and Africa Latin America Source: The Federation of Finnish Technology Industries labour force survey Source: The Federation of Finnish Technology Industries labour force survey 12 Economic situation and outlook 2/214

13 PERSONNEL DEVELOPMENT Metals Industry Finnish metals industry companies employed a total of 4, people in 213. A total of 16, employees worked in Finland and 24, in international subsidiaries. In the reference year 2, staff numbers were almost 18, in Finland and more than 12, abroad. In 213, the number of personnel in Finland fell by an average of 1,5 people, or eight per cent. Abroad, staff numbers fell by some 14 per cent. Corporate restructuring has caused strong fluctuations in international employment over the years, but the general trend has been positive. More than 6 per cent of all international staff employed by Finnish metals industry companies are located in Western Europe and North America. Between January and March 214, metals industry companies decreased their personnel in Finland by some two per cent from the average in 213. At the end of March, the industry employed some 15,5 people in total. Consulting Engineering Finnish consulting engineering companies employed a total of 52, people in 213. A total of 46, employees worked in Finland and 6, in international subsidiaries. In the reference year 2, staff numbers totalled 31, in Finland and slightly fewer than 3, abroad. In 213 the number of international staff fell by a few hundred people. When considering the number of people employed by international subsidiaries, it is important to take into account the effect of corporate restructuring. In this industry, about half of the international staff employed by Finnish companies are located in Western Europe. Emerging countries employ less than half of the international staff. Between January and March 214, consulting engineering companies decreased their personnel in Finland by less than two per cent from the average in 213. By the end of March, the industry employed 45, people in total. Personnel in the Metals Industry Personnel in Consulting Engineering (31.3) Personnel in Finland Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey (31.3) Personnel in Finland Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey Metals Industry Personnel in Subsidiaries Abroad Western Europe North America Asia and Oceania Central and Eastern Europe The Middle East and Africa Latin America Source: The Federation of Finnish Technology Industries labour force survey Consulting Engineering Personnel in Subsidiaries Abroad Western Europe North America Asia and Oceania Central and Eastern Europe The Middle East and Africa Latin America Source: The Federation of Finnish Technology Industries labour force survey 13 Economic situation and outlook 2/214

14 PERSONNEL DEVELOPMENT Information Technology Finnish information technology industry companies employed a total of 7, people in 213. Some 55, employees worked in Finland and 15, in international subsidiaries. In the reference year 2, staff numbers totalled 37, in Finland and slightly over 5, abroad. Corporate restructuring has caused some fluctuation in international employment over the years. International staff numbers have been shrinking for the past two years. In 213, the numbers fell by seven per cent. Some 4 per cent of all international staff employed by Finnish information technology companies are located in Western Europe. In 213, international staff levels were reduced quite severely in both the emerging and developed economies. Between January and March 214, information technology companies decreased their personnel in Finland slightly from the 213 average. By the end of March, the industry employed some 54,5 people in total. Personnel in Information Technology (31.3) Personnel in Finland Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey Information Technology Personnel in Subsidiaries Abroad Western Europe North America Asia and Oceania Central and Eastern Europe The Middle East and Africa Latin America Source: The Federation of Finnish Technology Industries labour force survey 14 Economic situation and outlook 2/214

15 ECONOMIC SITUATION AND OUTLOOK 2/214 Information based on the situation on 5 May 214 Further information: Jukka Palokangas, Chief Economist, tel , Petteri Rautaporras, Economist, tel , Please visit the homepage of the Federation of Finnish Technology Industries for additional information on technology industry turnover, exports, investments, personnel and the development of producer and metal prices:

16 The Federation of Finnish Technology Industries Eteläranta 1, P.O.Box 1, FI-131 Helsinki tel , fax Cover photos: Copyright Ramboll