Finnish companies see weak business cycle: EK Survey

Finnish companies’ estimates of their outlooks have remained weak but expectations have continued to improve slightly, according to the Business Tendency Survey conducted by Confederation of Finnish Industries (EK) in April.

Although inflation is already starting to slow, the full impact of the rapidly rising interest rates on economic development has not yet been felt, said EK in a press release on Friday referring to the survey.

From the global economy’s perspective, there is still no certainty of how soft the landing will be.

“In Finland, companies felt that the economic situation had remained weak during the spring. Although expectations are no longer as pessimistic as they were in winter, economic growth is not yet on a steady footing. We are approaching a traditional economic cycle, where construction and manufacturing are weakening first, while services are still somehow holding their own,” said Sami Pakarinen, Director of the EK.

Companies’ production and sales performance has weakened and expectations regarding the coming months are pessimistic.

Among the main sectors, the biggest problems are being experienced in construction, where the rise in interest rates is causing a marked fall in demand.

In manufacturing, order backlogs have continued to thin out, but demand for services has maintained the employment trend.

“The biggest obstacle to growth continues to be insufficient demand, which was reported by 41% of the responding companies. Lack of demand is affecting companies in all sectors. Construction has been hit hardest, as 63% of companies reported too little demand. The last time the level was higher than this was during the financial crisis in 2009,” said Pakarinen.

The economic slowdown has not had a significant impact on the challenges companies face in finding skilled labour.

In the April Business Tendency Survey, 26% of respondents still reported problems with the availability of labour.

Services, in particular, have sustained the employment level and service sector companies have experienced more problems with the availability of labour than the other main sectors.

“The labour force is expected to decline over the coming months, but companies are also in need of skilled labour. Companies have taken action to solve this problem and have started to recruit more and more workers from abroad. Based on preliminary data from last year, the number of arrivals from Asia in particular have increased. The success of work-based immigration is a matter of life and death for Finland,” said Pakarinen.

The Business Tendency Survey is published four times a year by the EK.

In April 2023, the EK asked businesses to evaluate their business outlook for the first quarter of 2023.

A total of 1,111 companies employing about 250,000 people in Finland responded to the survey.