The recession in Finnish industry bottomed out in the first months of the year. As many as nearly a third of corporate executives now expect an improvement. Production and exports are expected to start brisk growth in the coming months. However, there is uncertainty as to how long it will last.

TT's business tendency survey of May shows that industry's confidence in the future is strong again. The business outlook indicator climbed to 29 as opposed to 10 in January and -20 in October. 31% of respondents now expect an improvement, while 2% expect a deterioration. 67% expect no change in the coming months.

When the indicator reaches higher figures on the plus side, it indicates an acceleration in growth. If a negative figure rises closer to zero it indicates that a slowdown in growth is coming to a halt.

Expectations in the construction sector were also showing optimism after a long time. The business outlook indicator is now at 1 as opposed to -25 in January.

The beginning looks good;
what after that?
Brisk growth in production and exports is expected in the second quarter, but there is a great risk of deterioration in the July-September quarter. The world economic outlook is anything but clear.

But industry is expecting that demand will pick up in April-June compared to the early year. New orders were scarce but the order backlog started to increase in January-March. The order backlog has now been smaller than normal for 18 months.

"The second quarter will bring strong and rapid growth, but it won't necessarily last for long. A new weaker period may start in July-September," says Pekka Tsupari, the manager at TT responsible for the business tendency surveys.

"The situation follows US-style logic. The US had very good growth figures in the first quarter. We are a step behind the US cycle, so it is likely we will have an equivalent situation in the second quarter."

Whether growth will last is still a good question. Investments have not started well and growth is still very consumption-driven.

"Many factors indicate growth, however. The product order backlog has finally taken a turn for the better. As inventories are low, merely the need to fill them will create some growth."

Export expectations were not met
Demand for exports remained low despite the opposite expectations. In fact, exports developed a lot worse than expected. Exports were down in January-March compared to last year's corresponding period. Exports were also lower than in October-December. In April-May, export expectations are, however, strongly on the positive side. If these are realized exports will grow very rapidly in the second quarter.

Full capacity utilisation increased in January-March. 64% of industry is now operating at full capacity, which is 10 percentage points more than in January. Capacity utilization increased across the board. However, we are still behind the normal situation: long-term full capacity utilization is 73%.

>> www.tt.fi/english/bts

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