Dark clouds gather over employment − technology industry sustained by strong order books for the time being
“While it seems that a drastic downturn is not likely, slowing global growth and very subdued development in the eurozone cannot but have an impact on the export outlook of technology industries and Finland as a whole“, says Petteri Rautaporras, Director, Chief Economist at Technology Industries of Finland.
This information is based on the recent order book and personnel survey published by Technology Industries of Finland.
Technology industry companies continued to report good results for the third quarter. The monetary value of new orders was slightly higher than in the previous quarter and 17 per cent higher year-on-year. In real terms, the order intake has not increased as much as it seems, because producer prices have increased significantly over the past twelve months. In the third quarter, producer prices were approximately 15 per cent higher year-on-year.
The weakening economic cycle is reflected in tender requests in particular. The balance figure for tender requests in October was clearly negative at -7, marking five consecutive quarters of decline. This indicates that demand is waning.
At the end of September, the value of technology industry order books was 6 per cent higher than at the end of June and 10 per cent higher than in September 2021.
“It is almost certain that the eurozone economy will contract in the fourth quarter. The situation is especially grim in Germany, which is our main export market. The seriousness of the situation is also illustrated by the manufacturing PMIs, according to which new orders saw their fastest decline since the financial crisis of 2009, excluding the pandemic,” Rautaporras states.
“The situation in Finland is also expected to deteriorate in early 2023 at the latest. While we are not likely to see a fast deterioration, we have to face the fact that output is declining and there is an increased risk of unemployment. This is a very dangerous scenario, because strong employment figures have so far maintained private consumption despite the high rate of inflation,” Rautaporras points out.
Jaakko Hirvola: Do not sacrifice growth
Jaakko Hirvola, the CEO of Technology Industries of Finland, emphasises that we should beware of the risks, but also take strategic actions to support growth. The economic indicators have taken a worrying downward turn. According to Hirvola, Finnish technology industries have fared remarkably well so far, considering that the market situation is becoming increasingly challenging.
“Decision-makers are starting to focus on upcoming elections, but the current government has many problems to tackle. Such as the high cost of energy, which needs to be brought down throughout Europe. Essential to this is the reform to the electricity market model currently being prepared by the European Commission. This needs to be implemented in a market-based and effective way. High cost of electricity is a burden on both households and businesses, which will in the long run put employment at risk,” Hirvola points out.
While the political parties are in election mode, Hirvola would like to see them come up with ways to stimulate economic growth in addition to considering ways to cut costs. And not to sacrifice growth, even if it is necessary to curtail spending because of soaring private sector indebtedness. Hirvola emphasises that competence and RDI are two distinct areas that should avoid austerity measures altogether and instead see a significant increase in funding.
“Once again, labour market solutions play a very important role. While inflation is unrelenting, we cannot play catch-up with it without causing more problems and exacerbating price pressures further. We must remember to look after our cost competitiveness so as not to make decisions that will reverse the positive employment trend we have seen recently.”
Hirvola says that while the economic situation is challenging, many new opportunities are also opening up for Finland. Green transition and digital transformation are driving the demand for clean technologies. In the short term, both energy efficiency solutions that help tackle the energy crisis and Finland’s future NATO membership will boost demand and provide new opportunities for both defence and civil technologies. New growth opportunities should be grasped with both hands.
Jaakko Hirvola, CEO, phone +358 40 063 3751
Petteri Rautaporras, Director, Chief Economist, phone +358 50 304 2220