Economic Outlook Technology Industries of Finland 1 218 Global And Finnish Economic Outlook Good global economic outlook s. 3 Technology Industries In Finland Significant growth in the value of orders due to ship orders s. 5
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 2 Economic Outlook 1/218
Good global economic outlook Global And Finnish Economic Outlook The global economy is experiencing strong growth and the positive trend continues across all geographical areas and sectors. The outlook remains good for both manufacturing and services. The improved outlook in comparison to 217 is based on recent figures on actual growth, as well as the manufacturing and service sector purchasing managers index (PMI) surveyed during December and January. Favourable growth of GDP and trade has continued globally with only a few exceptions. PMIs are collected from all major economies, and separately for manufacturing and services. Based on this data, economic growth seems to have strengthened further in recent months. Indicators of consumer confidence also remain at a high level. The competition for the distribution of global economic growth will intensify after the US tax reform. The lower corporate rate of 21%, full expensing of capital investment and a lower repatriation tax for bringing foreign profits back to the US will have an overall positive effect on the US economy. The introduced tax cuts will allow the Federal Reserve to raise its interest rates faster to align its financial policy with the current economic situation. This is desirable, as it will allow the central bank to introduce lower interest rates to support growth during future downturns. Rate hikes are to be expected in the euro area, too, but without a tax policy to offset the negative effects of higher interest rates on growth. On the contrary, the European Commission s corporation tax harmonisation plans threaten to weaken the competitiveness of business in Europe. Finnish growth paradox The economy in Finland enjoyed robust growth in 217. According to preliminary data, Finnish GDP grew between 3 and 3.5 per cent. However, it remained below the 28 level. The volume of Finland s GDP in the autumn of 217 was less than two per cent below the level reported in early 28. The gap between Finland and the rest of the euro area has widened significantly. In the autumn of 217, the GDP in the other countries was 6.5 per cent above the level reported in early 28. The difference between Finland and the rest of the euro area is as high as eight per cent. Finnish exports also grew in 217, by some eight per cent according to preliminary data. More specifically, exports jumped to a higher level in the first quarter of 217, after which the growth stalled. The development of Finnish exports since 28 is in stark contrast to that of the competitor countries. Finland is lagging behind by as much as 4 per cent in comparison to other countries in the euro area. Considering that the rest of the euro area also continues to enjoy robust economic growth, Finland faces a Herculean task to catch up with them. The difference in GDP and export growth is mainly due to the reduced levels of production and turnover of large manufacturing enterprises in Finland. This is a historical shift, and it is misleading to attribute it to creative destruction and natural progression. Large manufacturing enterprises have grown, but the growth has taken place outside Finland. They continue to innovate, but these innovations increasingly take place in foreign countries. The Finnish economy is experiencing a growth paradox. While these companies have managed to expand their turnover and exports slightly during the past eighteen months, the contraction of business activity that has occurred since 28 significantly limits the overall growth potential of the Finnish economy. It has weakened substantially, which has been the main driver of public debt. Developments in recent years confirm that success of large enterprises is vital for the growth of small and medium-sized enterprises and the economy as a whole. The problem will not solve itself. Instead, significant further steps are required to improve the operating environment of both large and small and medium-sized enterprises in Finland. It is a fact that current economic and tax policies will not help Finland catch up with the rest of the euro area. Comparing the turnover development, export volumes and personnel numbers of manufacturing enterprises with a minimum of 5 employees with that of the entire industry since 28 reveals the extent of the growth paradox. According to the calculations of Statistics Finland and Finnish customs, large manufacturing enterprises turnover and export levels were at their lowest in 216. GDP also Grows in Finland, but the Backlog for the Other Euro Area Countries Is up to 8% Finland s Exports Jumped in Early 217, but the Backlog for the Other Euro Area Countries is 4 % 18 16 14 12 1 98 96 94 92 9 Index, 28=1 28 29 21 Finland 211 212 213 214 Eurozone 215 216 217 14 13 12 11 1 9 8 7 Export of goods and services by quarter, billion euros, at fixed prices, index 28=1 28 Finland 29 21 211 212 213 Q4: Estimate based on goods exports during October-November 214 Eurozone 215 216 217 Source: Macrobond Latest information: 217 Q3 Source: Macrobond, Eurostat Latest information: 217 Q3 Economic Outlook 1/218 3
Their reported turnover was EUR 22 billion below the 28 level and value of goods exports EUR 14 billion lower. As a result, the total manufacturing turnover in Finland in 216 fell EUR 29 billion short of the level reported in 28. This means that small and medium-sized enterprises also experienced a fall in turnover. Total Finnish exports and total manufacturing exports fell slightly less than those of large manufacturing enterprises. Total value of manufacturing exports fell by some EUR 11 billion and total goods exports from Finland by some EUR 1 billion. Manufacturing turnover and exports increased slightly in 217. However, based on preliminary data for 217, total manufacturing turnover remained EUR 24 billion and total goods exports from manufacturing EUR seven billion below the levels reported in 28. Turnover and exports of large manufacturing enterprises also grew slightly. The drop in turnover and export levels has weighed heavily on employment numbers. In 216, personnel in large enterprises was down by 52, from 28. In total, 93, jobs were lost, which reflects the effect of large enterprises on their subcontractors. As a result of the changes in recent years, large enterprises share of manufacturing turnover, exports and jobs have also contracted. They now account for less than 5 per cent of manufacturing turnover, less than 6 per cent of goods exports and some 25 per cent of jobs. Calculations of Statistics Finland and Finnish customs on the development of large manufacturing enterprises in Finland Technology Industries of Finland commissioned Statistics Finland and Finnish customs to compile statistics on the turnover development, goods export volumes and personnel numbers of manufacturing companies with a minimum of 5 employees between 28 and 216 (export data also includes data from 217). Statistics Finland s data includes large technology, forest and chemical industry enterprises with a minimum of 5 employees in 28. They totalled 74 in 28 and 67 in 216. Data is provided up to 216. Finnish custom s data includes all sectors in 28-216 and January September 217. The data reveals the level of contraction in large enterprises turnover, exports and personnel numbers since 28. The statistics also reveal how much the recession has reduced large enterprises share of total turnover and personnel numbers, as well as their share of manufacturing goods exports and total exports from Finland. Growth paradox: It Is Difficult to Overcome the Lost Turnover of Large Industrial Companies* 14 13 12 11 1 9 8 7 6 5 4 Turnover in Finland, billion euros, at fixed 216 prices 28 29 21 211 Turnover of all industrial companies 212 213 214 215 Turnover of large industrial companies* -24 billion -29 billion -22 billion 216 217** *) Large companies in the technology, forestry and chemical industries with a staff of at least 5 in 28. **) An estimate of 217 s turnover is based on the development of the January-October 217 turnover index and the producer prices for January-November 217. Source: Statistics Finland / structural business and financial statement statistics, turnover index, producer price indices, national accounts Growth paradox: It Is Difficult to Overcome the Lost Jobs of Large Industrial Companies* and Sub-contractors Turnover in Finland, billion euros, at fixed 216 prices 4 36-92 55-92 55 32 28 24 2 16 12-51 66 8 4 28 29 21 211 212 213 214 215 216 217** Employees of all industrial companies Employees of large industrial companies* *) Large companies in the technology, forestry and chemical industries with a staff of at least 5 in 28. **) The estimate of the employees of all industrial companies in 217 is based on the employees development of the national accounts for January-September. Source: Statistics Finland / structural business and financial statement statistics, national accounts Growth paradox: It Is Difficult to Overcome the Drop in Exports of Large Industrial Companies* Goods export from Finland, billion euros, at fixed 216 prices 7 65-4 billion 6-1 billion 55-7 billion 5-11 billion 45 4 35-1 billion 3-14 billion 25 2 28 29 21 211 212 213 214 215 216 217** Total export (including products manufactured abroad) Total industrial goods exports Goods exports of large industrial companies *) Large industrial companies with a staff of at least 5 are involved. **) An estimate of total exports for 217 is based on the development of export and export price indices in January-November, the export distribution of the industrial sector in the January-September export development. Source: Board of Customs, Statistics Finland / export prices Unlike the Competition Countries, in Finland Business Investment Is Still Below the Level in 28 13 125 12 115 11 15 1 95 9 85 8 75 7 Corporate investments, at fixed prices, index 28=1 28 29 21 211 212 213 214 215 216 217e 218e USA Sweden Germany Source: OECD, Economic Outlook (December 217) Switzerland Netherlands Finland 4 Economic Outlook 1/218
Technology Industries In Finland Significant growth in the value of orders due to ship orders The turnover of technology industry companies in Finland grew by 1 per cent in 217 from 216. About half of the increase was attributable to volume growth and half to increase in sales due to rising world market prices of raw materials and components. In 217, the turnover amounted to EUR 74.1 billion. In 28, prior to the financial crisis, the turnover of technology industry companies in Finland totalled EUR 85.7 billion. The value of technology industry companies new orders and order books grew strongly between October and December. In late 217, the growth was boosted by two large ship orders in particular. Excluding these, new orders and order books remained stagnant after the spring of 217. The effect of the new ship orders will not be reflected in Finnish export volumes until after 221. The technology industry companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between October and December was 54 per cent higher than between July and September and 4 per cent higher than in the corresponding period in 216. Of the respondents, 65 per cent reported that the number of new orders was up since the July-September period, 29 per cent said it was down and six per cent said it had remained stable. At the end of December, the value of order books was 11 per cent higher than at the end of September and 25 per cent higher than in December 216. Forty-seven per cent of companies reported a decrease in the number of orders from September, while 41 per cent reported an increase and 12 per cent had seen no change. Judging from order trends in recent months, the turnover of technology industry companies is expected to be higher in the spring of 218 than in the corresponding period last year. The number of personnel employed by technology industry companies in Finland grew by slightly more than two per cent in 217 from 216. On average, the industry employed 297, people, up 6,4 from 216. The recruitment activities of technology industry companies picked up markedly in 217. They recruited a total of 42,5 new employees in 217. In 216, total recruitments came to 28,5. Some companies were increasing their personnel, while others were hiring new employees due to retirements and employee turnover. Turnover of the Technology Industry in Finland Value of New Orders in the Technology Industry* in Finland Billion euros, at current prices 36 32 28 24 2 16 12 8 4 28 29 21 211 212 213 214 215 216 217 Electronics and the Mechanical engineering electrotechnical industry Consulting engineering Metals industry Information technology Source: Macrobond, Statistics Finland, Technology Industries of Finland 13 12 11 1 9 8 7 6 5 4 3 2 1 28 29 21 211 212 213 214 215 216 217 Domestic Export Combined Change: IV,217 / IV,216 IV,217 / III,217 *) Excl. metals industry, Export: +49 % +61 % game industry and Domestic: +16 % +34 % data center companies Combined: +4 % +54 % companies, latest observation October-December 217. Technology Industry Personnel in Finland and Abroad Value of Order Books in the Technology Industry* in Finland 35 33 31 29 27 25 23 21 19 17 15 25 26 27 28 29 Personnel in Finland 21 211 212 213 214 215 216 217 Personnel in subsidiaries abroad Source: Statistics Finland, The Federation of Finnish Technology Industries labour force survey, Macrobond 26 24 22 2 18 16 14 12 1 8 6 4 2 28 29 21 211 212 213 Domestic Export Change: 31.12.217 / 31.12.216 31.12.217 / 3.9.217 Export: +32 % +12 % Domestic: +4 % +5 % Combined: +25 % +11 % 214 215 Combined 216 217 *) Excl. metals industry, game industry and data center companies companies, latest observation 31.12.217 Economic Outlook 1/218 5
Electronics and Electrotechnical Industry in Finland Orders pick up slightly The turnover of companies in the electronics and electrotechnical industry (telecommunications equipment, electrical equipment and medical technology) in Finland grew by 1 per cent in 217 from 216, amounting to EUR 14.7 billion. In 28, prior to the financial crisis, the industry turnover in Finland totalled EUR 3.4 billion. Both new orders and order books grew between October and December in the electronics and electrotechnical industry. In comparison to the previous quarter, more companies saw an increase in orders than a fall. The electronics and electrotechnical companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between October and December was 14 per cent higher than in the preceding quarter and nine per cent higher than in the corresponding period in 216. At the end of December, the value of order books was eight per cent higher than at the end of September and five per cent higher than in December 216. Judging from order trends in recent months, the turnover of electronics and electrotechnical industry companies is expected to remain at the same or slightly higher level during the spring of 218 than in the corresponding period last year. The number of personnel employed by electronics and electrotechnical companies in Finland dropped by slightly more than one per cent in 217 from 216. On average, the industry employed 39, people, down 5 from 216. Value of New Orders in the Electronics and Electrotechnical Industry in Finland 8 7 5 7 6 5 6 5 5 5 4 5 4 3 5 3 2 5 2 1 5 1 5 28 29 21 211 212 213 214 215 216 217 Domestic Export Combined Change: IV,217 / IV,216 IV,217 / III,217 Export: -3 % +17 % Domestic: +73 % +7 % Combined: +9 % +14 % companies, latest observation October-December 217. Value of Order Books in the Electronics and Electrotechnical Industry in Finland 8 5 8 7 5 7 6 5 6 5 5 5 4 5 4 3 5 3 2 5 2 1 5 1 5 28 29 21 Domestic 211 212 213 Export 214 215 216 Combined Change: 31.12.217 / 31.12.216 31.12.217 / 3.9.217 Export: -4 % +8 % Domestic: +48 % +6 % Combined: +5 % +8 % companies, latest observation 31.12.217 217 6 Economic Outlook 1/218
Copyright Kone Corporation Mechanical Engineering in Finland Strong growth in the value of orders due to ship orders The turnover of mechanical engineering companies (machinery, metal products and vehicles) in Finland increased by eight per cent in 217 from 216, amounting to EUR 3 billion. In 28, prior to the financial crisis, the industry turnover in Finland totalled EUR 33.3 billion. Both new orders and order books grew significantly between October and December in mechanical engineering. Growth was driven by two large ship orders in particular. Despite this, more companies saw a fall in orders than an increase between September and December. The new ship orders will not be reflected in Finnish export volumes until after 221. The mechanical engineering companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between October and December was 93 per cent higher than in the preceding quarter and 8 per cent higher than in the corresponding period in 216. At the end of December, the value of order books was 13 per cent higher than at the end of September and 38 per cent higher than in December 216. Judging from order trends in recent months, the turnover of mechanical engineering companies is expected to be higher in the spring of 218 than in the corresponding period last year. The number of personnel in mechanical engineering companies in Finland grew by slightly more than three per cent in 217 from 216. On average, the industry employed 128, people, up 4,2 from 216. Value of New Orders in the Machanical Engineering in Finland Value of Order Books in the Mechanical Engineering in Finland 7 6 5 6 5 5 5 4 5 4 3 5 3 2 5 2 1 5 1 5 28 29 21 211 212 213 214 215 216 Domestic Export Combined Change: IV,217 / IV,216 IV,217 / III,217 Export: +12 % +97 % Domestic: +9 % +67 % Combined: +8 % +93 % companies, latest observation October-December 217. 217 16 15 14 Combined 13 12 11 1 9 8 7 6 5 4 3 2 1 28 29 21 211 212 213 214 215 216 217 Domestic Export Change: 31.12.217 / 31.12.216 31.12.217 / 3.9.217 Export: +46 % +14 % Domestic: -3 % +7 % Combined: +38 % +13 % companies, latest observation 31.12.217 Economic Outlook 1/218 7
Copyright Ovako Metals Industry in Finland Significant turnover growth, slight growth in production The turnover of metals industry companies (steel products, nonferrous metals, castings and metallic minerals) in Finland grew some 2 per cent in 217 from 216, amounting to EUR 1.9 billion. In 28, prior to the financial crisis, metals industry turnover in Finland totalled EUR 11.1 billion. Most of the growth in the turnover of metals industry companies in 217 was attributable to the rise in sales prices. This was due to the favourable development in world market prices of steel products and non-ferrous metals after early 216. Producer prices in Finland were up some 2 per cent in 217 from 216. Total production of steel products, non-ferrous metals, castings and metallic minerals in Finland increased slightly from 216. Production of steel products remained at the same level while production of non-ferrous metals, metallic minerals and castings in particular increased. Global steel production grew by five per cent from 216. Production increased by five per cent in both Asia and Northern America and by four per cent in the EU. China, Japan, India, the United States, Russia and South Korea were the largest producers. China accounted for 5 per cent of global steel production. The number of personnel employed by metals industry companies in Finland decreased by some two per cent in 217 from 216. On average, the industry employed 15,1 people, down 3 from 216. Turnover of the Metals Industry in Finland Production Volume of the Metals Industry in Finland 13 12 11 1 9 8 7 6 5 4 Index 28 = 1 Change: 1-1,217 / 1-1,216, % 23 % 28 29 21 211 212 213 214 215 216 217 14 13 12 11 1 9 8 7 6 5 Index 28 = 1 28 29 21 211 Change: 1-11,217 / 1-11,216, % 2 % 212 213 214 215 216 217 Source: Macrobond, Statistics Finland Latest information: October 217 Source: Macrobond, Statistics Finland Latest information: November 217 8 Economic Outlook 1/218
Consulting Engineering in Finland Boost in orders towards the end of the year The turnover of consulting engineering companies (industrial, social and construction expert services) in Finland grew by eight per cent in 217 from 216, amounting to EUR 6.2 billion. In 28, prior to the financial crisis, the industry turnover in Finland totalled EUR 5.5 billion. Both new orders and order books picked up between October and December from early autumn in consulting engineering. The growth was broad-based. Typically for the sector, order volumes fluctuate strongly from one quarter to another. The consulting engineering companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between October and December was 4 per cent higher than in the preceding quarter and 19 per cent higher than in the corresponding period in 216. At the end of December, the value of order books was eight per cent higher than at the end of September and 15 per cent higher than in December 216. Judging from order trends in recent months, the turnover of consulting engineering companies is expected to be higher in the spring of 218 than in the corresponding period last year. The number of personnel in consulting engineering in Finland grew by some four per cent in 217 from 216. On average, the industry employed 52,1 people, up 2, from 216. Value of New Orders in the Consulting Engineering in Finland 3 25 2 15 1 5 28 29 21 211 212 213 214 215 216 217 Domestic Export Combined Change: IV,217 / IV,216 IV,217 / III,217 Export: -38 % +17 % Domestic: +27 % +42 % Combined: +19 % +4 % companies, latest observation October-December 217. Value of Order Books in the Consulting Engineering in Finland 8 75 Combined 7 65 6 55 5 45 4 35 3 25 2 15 1 5 28 29 21 211 212 213 214 215 216 217 Domestic Export Change: 31.12.217 / 31.12.216 31.12.217 / 3.9.217 Export: -2 % -9 % Domestic: +19 % +13 % Combined: +15 % +8 % companies, latest observation 31.12.217. Economic Outlook 1/218 9
Information Technology in Finland Uneven growth continues The turnover of information technology companies (IT services and software) in Finland grew by eight per cent in 217 from 216, amounting to EUR 12.4 billion. In 28, prior to the financial crisis, the industry turnover in Finland was EUR 6.7 billion. Growth has been distributed very unevenly between IT companies in the past year. The sales of software and data processing services grew by six per cent in total in 217, but the turnover of data centres and web portals grew by 18 per cent in total. While the uneven order trends continued between individual information technology companies in the October December period, the situation improved in comparison to the early autumn. However, there was no upward turn in the total value of order books. The information technology companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders between October and December was 42 per cent higher than in the preceding quarter, but 13 per cent lower than in the corresponding period in 216. Game industry and data centre companies are not included in the survey. At the end of December, the value of order books was two per cent lower than at the end of September. Order books contracted by 12 per cent from December 216. Judging from order trends in recent months and the positive development of the data centre turnover in particular, the turnover of information technology companies is expected to be slightly higher during the spring of 218 than in the corresponding period last year. The number of personnel in information technology companies in Finland grew by slightly less than two per cent in 217 from 216. On average, the industry employed 62,6 people, up 1, from 216. Value of New Orders in the Information Technology* in Finland Value of Order Books in the Information Technology* in Finland 85 8 75 7 65 6 55 5 45 4 35 3 25 2 15 1 5 28 29 21 211 212 213 214 Change: IV,217 / IV,216 IV,217 / III,217 Combined: -13 % +42 % 215 216 217 2 1 8 1 6 1 4 1 2 1 8 6 4 2 28 29 21 211 212 213 214 215 216 217 Change: 31.12.217 / 31.12.216 31.12.217 / 3.9.217 Combined: -12 % -2 % *) Excl. game industry and data center companies. *) Excl. game industry and data center companies. companies, latest observation October-December 217. companies, latest observation 31.12.217. 1 Economic Outlook 1/218
ECONOMIC OUTLOOK 1 218 Information based on the situation on 24 January 218 Further information: Jukka Palokangas, Chief Economist, phone +358 9 1923 358, +358 4 75 5469 Petteri Rautaporras, Economist, phone +358 9 1923 357, +358 5 34 222 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 prices: www.techind.fi. Technology Industries of Finland Eteläranta 1, P.O.Box 1, FI-131 Helsinki tel. +358 9 19231 www.techind.fi Economic Outlook 1/218 11
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