Technology industry demand continued to weaken – Downturn in turnover expected
According to the recent order book and personnel survey by Technology Industries of Finland, turnover of Finland’s most important export sector is expected to stagnate or even to contract during the rest of 2023. Output volumes have not increased at all in the entire Finnish manufacturing sector during early 2023.
“Judging from technology industry order trends in the first half of 2023, it seems that both order and output volumes have peaked for now, as have personnel numbers. Although almost all of the eurozone manufacturing indicators have weakened, a more dramatic drop seems unlikely for now. It already seems quite clear that Finnish technology industry companies will face a downward trend in the remainder of the year. The question now is whether we will see a minor or major drop,” says Petteri Rautaporras, Director, Chief Economist at Technology Industries of Finland.
The monetary value of new orders received by technology industry companies in the April−June period was 9 per cent lower than in the previous quarter and 5 per cent lower year-on-year. In the spring, the monetary value of new orders was still 12 per cent higher year-on-year, although the value of new orders weakened already in early 2023. At the end of June, the value of order books was 6 per cent lower than at the end of March and 4 per cent lower than in June 2022.
In mechanical engineering, which is the largest technology industry sector, the value of new orders increased by 4 per cent in the April-June period from the previous quarter. Year-on-year, the value of new orders decreased by 2 per cent. The industry received several large orders from the defence industry in the second quarter, which increased the order intake. Without these orders, order intake would have decreased slightly.
The balance figure for tender request received by technology industry companies remained unchanged in July and was -13. A negative figure indicates that demand is weakening.
“All the information received from our member companies signals that demand has continued to weaken, but relatively moderately. There are no broader indications of a drastic turn for the worse, at least not yet. However, our surveys revealed that individual companies are facing increasingly different situations and some are clearly starting to struggle,” Rautaporras points out.
Skills shortage persists and recruitment of new personnel remains strong
The number of personnel employed by technology industry companies in Finland fell slightly from the all-time record reached in early 2023. At the end of June, the industry employed 335,000 people.
The total number of personnel in the industry is not expected to grow in the remainder of the year due to the weaker economic cycle. On the other hand, there should be no rapid decline in the number either, because experts are still in high demand in many technology industry companies.
According to the personnel survey by Technology Industries of Finland, the number of employees affected by lay-off procedures at the end of June was approximately 6,000, in comparison to 8,000 at the end of March. The number of lay-offs remains below the average.
“It is significant that the demand for experts and recruitment of new personnel remains strong despite weaker demand and output. New recruitments came to 13,400 in early 2023 and 11,700 in the April−June period. Some companies were increasing their personnel, others were hiring new employees due to retirements and employee turnover. Technology industry companies also provided approximately 21,000 summer jobs, which is an all-time record,” Rautaporras points out.
“The continued skills shortage contributes to companies' growth challenges. The government must take swift action to improve the skill level and employment rate in Finland, as well as to increase the number of working-age population,” says Jaakko Hirvola, the CEO of Technology Industries of Finland.
“All of these actions are of vital importance, especially because the economy is clearly cooling down. Companies are still willing to provide employment, to grow and to manufacture high-value products. Regardless of economic cycles, for example the technologies for green transition are a growth sector and Finnish industry is in a good position in that regard. To help a business succeed, it is necessary to remove barriers to employment, immigration must be substantially increased and innovation investments must be directed to business-led growth industry,” Hirvola states.
Jaakko Hirvola, CEO, phone +358 40 063 3751, Twitter: @JaakkoHirvola
Petteri Rautaporras, Director, Chief Economist, phone +358 50 304 2220, Twitter: @PRautaporras
Economic outlook - Technology Industries 3/2023