Economic Outlook · for the Time since Q3 2016 Tender Requests* Received by the Technology Industry...

1 | 2020

Global And Finnish Economic OutlookUncertainty eases slightly – outlook remains weakp. 3

Technology Industries In FinlandGreater divergence between companies – employment growth stalledp. 5

Economic Outlook Technology Industries of Finland

2 | Economic Outlook 1/2020

Contents

Global and Finnish Economic Outlook ................................. 3Technology Industries in Finland ......................................... 5Electronics and Electrotechnical Industry in Finland .......... 6Mechanical Engineering in Finland ...................................... 7Metals Industry in Finland .................................................... 8Consulting Engineering in Finland ....................................... 9Information Technology in Finland ..................................... 10

Economic Outlook 1/2020 | 3

Overall, the global economic outlook remains very uncertain, despite some glimpses of hope around the turn of the year. While we may escape the worst-case scenarios, prospects neverthe-less remain subdued.

Perhaps the most reassuring news was the signing of the “Phase One” US-China trade deal. For the economic outlook, it is essential that the current situation holds and the trade war will not accelerate further. According to the terms of the deal, there will be truce on new tariffs, but on the other hand, only a partial roll-back of previously implemented tariffs. As a result, the deal does not do much to reduce the existing trade barriers.

Brexit-related uncertainty has eased significantly since the UK general election in December. The House of Commons has passed the Withdrawal Agreement Bill, and the UK will leave the EU on 31 January 2020. This will be followed by a transition period, which will last until 31 December 2020, during which all EU rules and regulations will continue to apply. This transition period may also be extended. During the transition period, negotiations will be held to agree on the final terms for the movement of people, goods, services and capital between the UK and the EU. If the parties fail to reach an agreement and the transition period is not extended, trade will fall back on World Trade Organization (WTO) rules.

In the Middle East, the situation remains manifestly challenging. Since the military strikes and the passenger aircraft crash in early 2020, both the United States and Iran have issued statements that are surprisingly conciliatory, but the situation is nevertheless very delicate. A serious and widespread conflict in the Middle East would be a serious threat to global economic growth.

Financial markets in particular have been spooked by the emergence of the fast-spreading coronavirus in Asia. Should the authorities fail to contain the outbreak and it were to evolve into a pandemic, it would inevitably have negative consequences for the global economy.

The International Monetary Fund IMF again revised down its global growth forecast for 2020 and 2021. According to the IMF, the set of risks to global activity is less tilted to the downside compared to the previous forecast, and there are early signs of stabilisation.

World trade volume has failed to grow for close to two years now. Development has remained weak in both emerging and advanced market economies. The trade war with its tariffs and other trade restrictions and barriers has contributed to the lack of growth. The demand for exports from Finland is affected by the lack of growth in world trade.

In the euro area, growth prospects remain weak. In the manufacturing and service sectors, Purchase Managers’ Indices expect to see zero growth in early 2020. The European manufac-turing sector continues to face significant difficulties. While the worst may be over in terms of the downward spiral, the overall outlook nevertheless remains weak. The grim outlook in Europe will inevitably affect the outlook of technology industries in Finland.

In the United States, the outlook for manufacturing is slightly less bleak than at the end of 2019. Purchase Managers’ Indices signal growth in manufacturing production, although at a modest rate.

Global And Finnish Economic Outlook

Growth of World trade has been Stagnated Almost Two Years Allready

Eurozone Manufacturing Purchasing Managers’ Index Indicates that Production is Contracting in Near Future

Uncertainty eases slightly – outlook remains weak

65

60

30

55

50

45

40

35

201820172016 20152014201320122011201020092008

Eurozone Manufacturing Purchasing Managers’ Index,50 = no change from previous month

2019

Source: IHS MarkitLatest information December 2019.

2019201820172015 2016201420132012201120102009200880

90

110

130

100

120

140

85

95

115

135

105

125

145

Source: Macrobond, The CPB Netherlands Bureau for Economic Policy AnalysisLatest information October 2019.

Export volume

WorldEmerging countries Developed countries

Index 2008=100



Breakthrough in technology industry negotiations

Technology Industries of Finland and the Industrial Union signed a new collective agreement on Saturday 4 January 2020. Wages in the industry will go up by 3.3% over the 25-month term of the agreement. The working time extension agreed in the Competi-tiveness Pact has been withdrawn.

The breakthrough agreement will help maintain the relative cost competitiveness of Finland at the same or slightly lower level than before. This estimate is based on the assumption that the rest of the collective agreements that are yet to be negotiated will have a similar cost impact.

The development of cost competitiveness is largely influenced by the domestic sector labour market decisions and the ability of companies to utilize possibilities of improving productivity through local agreements. Earnings development in the domestic sector will weigh on the costs of exports almost as much as earnings development in the export sector.

The strength of economic growth is naturally also a factor. Should the global economy expand less than expected, it is more likely that Finland’s relative cost competitiveness against its competitors will become weaker. That is due to an inflexible wage formation that leads to poor reactivity to changes in economic conditions. Should the global economic growth exceed expecta-

Cost Competitiveness has Improved in Finland but We are Still Lagging Behind Competitors

Improvement of Employment has been Sluggish

Economic Forecasts for Finland

tions, cost competitiveness may also improve more than anticipated because of the relatively high agreement based wage increases in some of our competitor countries.

Finland’s outlook remains bleak

The Bank of Finland published its last bulletin for 2019 on 17 December. It was very similar to those issued in the autumn of 2019. The pace of economic growth in Finland will slow down to approximately 1 per cent in the coming years.

Similar to the prevailing trend in 2019, the main risks identified in the bullet remain negative. These risks are essentially linked to the growth outlook of the global economy.

Since the collective agreements signed to date do not promote employment in the next two years, employment growth solely relies on the measures implemented by the Finnish government. Slow growth, stagnating development of cost competitiveness and ageing population are a very difficult equation to resolve, also in terms of the sustainability of the public finances.

Eurobased Index, 2005=100Unit labour costs adjusted for the terms of trade*

2017 20192013 20152011200920072005

100

105

135

115

130

125

110

120

Euro area 12**Finland Trading partners***

*) Labour compensation relative to real national income.**) First 12 euro area member states. ***) 14 traditional industrial countries.Forecasts: Bank of Finland (Finland) and European Commission (other countries)Sources: Statistics Finland, Bank of Finland and European Commission

Based on Purchasing Managers’ Index Outlook in US Manufacturing has Improved Sligthly

65

60

30

55

50

45

40

35

201820172016 20152014201320122011201020092008

US Manufacturing Purchasing Managers’ Index,50 = no change from previous month

2019

Source: IHS MarkitLatest information December 2019. *) European commission and IMF report Harmonized Index of Consumer Prices

Updated 22.1.2020

Forecaster Inflation, % *

2018 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020DanskeBank Nordea

Bank of FinlandETLAPTTPT

European commissionIMF

Average

Date Change in GDP, %Change in privateConsumption, %

Change in Exports, %

Change in Investments, %

Unemployment rate, %

OP-Pohjola

Ministry of Finance

2018 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020

24.9.2019 1,7 1,2 0,8 0,8 1,0 3,5 1,5 0,5 0,6 1,1 1,4 6,6 6,6

4.9.2019 1,7 1,2 1,0 1,0 1,4 3,0 1,0 0,5 0,1 1,1 1,3 6,4 6,419.11.2019 1,7 1,4 0,5 1,0 0,8 3,0 0,5 1,5 0,6 1,0 1,2 6,5 6,5

7.10.2019 1,7 1,5 1,0 1,7 1,4 2,4 2,4 0,4 -0,3 1,1 1,4 6,5 6,3

17.12.2019 1,7 1,3 0,9 0,7 1,3 4,0 0,9 1,1 0,7 1,1 1,2 6,7 6,7

16.9.2019 1,7 1,1 0,9 0,7 1,1 3,8 1,3 1,4 0,8 1,1 1,1 6,5 6,312.9.2019 1,7 1,3 1,2 1,2 1,0 2,5 1,5 0,6 0,5 1,0 1,0 6,6 6,917.9.2019 1,7 1,3 1,1 1,0 0,9 4,0 2,0 1,4 -1,0 1,1 1,0 6,6 6,7

7.11.2019 1,7 1,4 1,1 0,6 1,1 1,9 2,2 0,7 0,4 1,2 1,4 6,7 6,5

15.10.2019 1,7 1,2 1,5 3,1 2,2 1,2 1,3 6,5 6,4

1,7 1,3 1,0 1,0 1,1 3,1 1,6 0,9 0,3 1,1 1,2 6,6 6,5

2018 20192014 20162012 2015 201720132011201065

67

71

69

73

66

68

72

70

7475

6,0

7,0

9,0

8,0

10,0

6,5

7,5

9,5

8,5

10,511,0

Source: Statistics Finland

Employment rate, trend, % Unemployment rate, trend, %

Employment rate, trend, % Unemployment rate, trend, %



Technology Industries In Finland

Greater divergence between companies – employment growth stalled

Number of Personnel in Finnish Technology Industry Declined for the Time since Q3 2016

Tender Requests* Received by the Technology Industry Companies in Finland

Value of New Orders in the Technology Industry* in FinlandTurnover of the Technology Industry in Finland

According to preliminary data, the turnover of technology industry companies in Finland grew by 6 per cent in 2019 from 2018. Turno-ver was up in all main sectors except metals industry. In 2019, the turnover in Finland amounted to EUR 83 billion.

The effects of global economic uncertainty and weakening demand remain apparent in Finnish technology industries. The rise in the value of technology industry companies’ new orders in the fourth quarter is almost exclusively attributable to very large ship orders. Without these, the value of new orders would have re-mained more or less unchanged from the previous quarter. Differ-ences between companies and sectors have widened further during the winter, and this trend is likely to continue until the end of winter.

The number of requests for tender received by technology industry companies dropped further. The balance figure that measures the level of tender requests remained clearly negative, although slightly higher than the very low level recorded for the previous quarter. This indicates a further deterioration of demand on the global market, suggesting that the development of order books in early 2020 will be more subdued.

The 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 15 per cent higher than in the preceding quarter and 17 per

cent higher than in the corresponding period in 2018.At the end of December, the value of order books was slightly

higher than at the end of September and 9 per cent higher than in December 2018. It is important to note that shipyards’ share of the total value of books is exceptionally large. Roughly 60 per cent of the strengthening of the order books since early 2014 is attributable to ship orders. The last ship in the shipyards’ order books is expected to be delivered in 2028. The strengthening of the ship building indus-try drives broad-based growth in many sectors.

Judging from order trends in recent months, the turnover of tech-nology industry companies in early 2020 is expected to be slightly higher than in the corresponding period last year.

The number of personnel employed by technology industry companies in Finland was up slightly more than 3 per cent from the 2018 average. The average number of personnel employed was 319,000, approximately 10,000 more than in 2018. Growth of employ-ment stalled towards the end of 2019, and in the October-December period, the number of personnel dropped for the first time since the third quarter of 2016.

Technology industry companies’ recruitments also took a down-ward turn towards the end of the year. They recruited a total of 40,500 new employees in 2019. In 2018, total recruitments came to 50,000.

100

75

50

125

150

175

200

225

20192017 20182016201520142013201220112010

Metals Industry -5 %Mechanical Engineering 4 %Information Technology 11 %

Electronics and Electrotechnical Industry 14 %

Consulting Engineering 5 %

Seasonally adjusted turnover indexShares of turnover in 2018: mechanical engineering 40 %, electronics and electrotechnical industry 20 %, information technology 18 %, metals industry 14 %, consulting engineering 8 %Source: Macrobond, Statistics Finland. Latest information October 2019.

Index 2010=100 Change: 1-10,2019 / 1-10,2018, % Million euros, at current prices

Domestic Export Combined

01 0002 0003 0004 0005 0006 0007 0008 0009 000

10 00011 00012 000

20192018201720152014201320122011201020092008 2016

Change: IV/2019 / IV,2018 IV,2019 / III,2019Export: +26 % +25 % Domestic: -8 % -14 %Combined: +17 % +15 %

Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation October-December 2019.

*) Excl. metals industry, game industry and data center companies

-60-50-40-30-20-10010203040

2016 2017 2018 2019 202020152014201320122011201020092008

Balance figure

*) ”Have you experienced a notable increase or decrease in the number of requests for tenders in recent weeks in comparison to the situation three months ago?”. Balance figure = the number of companies receiving more requests - the number of companies receiving less requests.”

Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, the last questionnaire in January 2020.

2018Q3

2019Q1

2019Q3

2018Q1

2016Q1

2016Q3

2015Q3

2017Q3

2017Q1

2015Q1

2014Q3-4 000

-2 0000

2 0004 0006 0008 000

10 00012 000

16 00014 000

Source: The Federation of Finnish Technology Industries’ labour force survey

Number of recruitments during the quarter

Change in number of personnel comparede to previous quarter



According to preliminary data, the turnover of companies in the electronics and electrotechnical industry (telecommunications equipment, electrical equipment and medical technology) in Fin-land grew by as much as 15 per cent in 2019 from 2018. In 2019, their turnover in Finland amounted to EUR 18.0 billion.

Both the value of new orders and order books continued to grow in the October-December period. The upward trend of orders has continued for three years now. However, differences between individual companies have widened further also in this sector.

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 9 per cent higher than in

Value of Order Books in the Electronics and Electrotechnical Industry in Finland

Value of New Orders in the Electronics and Electrotechnical Industry in Finland

the preceding quarter and 34 per cent higher than in the cor-responding period in 2018.

At the end of December, the value of order books was 6 per cent higher than at the end of September and 28 per cent higher than in December 2018.

Judging from order trends in recent months, the turnover of electronics and electrotechnical industry companies in early 2020 is expected to be higher than in the corresponding period in 2019.

The number of personnel employed by electronics and elec-trotechnical companies in Finland was up 2 per cent from the 2018 average. The industry employed some 38,700 people, up 800 from 2018.

Electronics and Electrotechnical Industry in FinlandNew orders continue to rise

Million euros, at current prices


0500

1 0001 5002 0002 5003 0003 5004 000

5 000

6 000

7 0007 500

4 500

5 500

6 500

2017 2019201820152014201320122011201020092008 2016

Change: IV,2019 / IV,2018 IV,2019 / III,2019Export: +42 % +9 % Domestic: +1 % +10 %Combined: +34 % +9 %


Domestic Export

0500

1 0001 5002 0002 5003 0003 5004 0004 5005 0005 5006 0006 5007 0007 5008 0008 500

Combined


2017 201920182015 20162014201320122011201020092008

Change: 31.12.2019 / 31.12.2018 31.12.2019 / 30.9.2019Export: +35 % +6 % Domestic: -2 % +5 %Combined: +28 % +6 %

Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31st December 2019.


According to preliminary data, the turnover of mechanical engineering companies (machinery, metal products and vehicles) in Finland increased by approximately 3 per cent in 2019 from 2018. In 2019, their turnover in Finland amounted to EUR 32.8 billion.

The value of new orders in mechanical engineering was up 21 percent from the previous quarter in the October-December period. Year-on-year, the value of new orders increased by 7 per cent in the last quarter. The increase in the value of new orders towards the end of 2019 is almost exclusively attributable to very large ship orders. Without these, the value of order books would have dropped notably from the previous quarter. Differences between individual companies have widened notably also in this sector.

At the end of December, the value of order books remained at the same level as at the end of September and 5 per cent higher than in December 2018. Shipyards’ share of the total value of

Value of Order Books in the Mechanical Engineering in Finland Value of New Orders in the Mechanical Engineering in Finland

order books is exceptionally large. Some 75 per cent of the strengthening of the order books since early 2014 is attributable to ship orders. The last ship in the shipyards’ order books is expected to be delivered in 2028. The strengthening of the ship building industry drives broad-based growth in many sectors.

Judging from order trends in recent months, the turnover of mechanical engineering companies in early 2020 is expected to be slightly higher than or the same as in the corresponding period last year.

The number of personnel employed by mechanical engineer-ing companies in Finland grew by approximately 2 per cent from the 2018 average. The industry employed some 134,200 people, up 2,900 from 2018.

Mechanical Engineering in FinlandShipyards bolster new orders



0500

1 0001 5002 0002 5003 0003 5004 0004 5005 000

6 500

5 5006 000

201920182017201620152014201320122011201020092008

Change: IV,2019 / IV,2018 IV,2019 / III,2019Export: +13 % +47 %Domestic: -19 % -42 %Combined: +7 % +21 %


Domestic Export

02 0004 0006 0008 000

10 00012 00014 000

18 00016 000

2017 2018 20192015 20162014201320122011201020092008

Change: 31.12.2019 / 31.12.2018 31.12.2019 / 30.9.2019Export: +1 % +2 % Domestic: +36 % -3 %Combined: +5 % +1 %



Combined


Metals Industry in FinlandTurnover and production volume continue to drop

According to preliminary data, the turnover of metals indus-try companies (steel products, non-ferrous metals, castings and metallic minerals) in Finland decreased by approximately 5 per cent in 2019 from 2018. In 2019, their turnover in Finland amounted to EUR 10.6 billion.

The total production of steel products, non-ferrous metals, castings and metallic minerals in Finland in the January-Novem-ber period decreased by as much as 10 per cent year-on-year.

The number of personnel employed by metals industry com-panies in Finland decreased by approximately 0.5 per cent from the 2018 average. The industry employed some 15,800 people, approximately 100 less than in 2018.

Production Volume of the Metals Industry in FinlandTurnover of the Metals Industry in Finland

In comparison to the corresponding period in 2018, global steel production increased by less than 3 per cent between January and November. Production increased by 5 per cent in Asia and by 2 per cent in the United States. Production in Europe decreased by more than 4 per cent. Many countries are still feel-ing the effects of the trade war and economic sanctions. In early 2019, production fell slightly in Russia while dropping more than 10 per cent in Turkey, 5 per cent in Canada and more than 4 per cent in Japan.

China, India, Japan, the United States, South Korea and Rus-sia were the largest producers in August. China accounted for 54 per cent of global steel production.

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Index 2008=100 Change: 1-10,2019 / 1-10,2018, %

40

50

60

70

80

90

100

110

120-5 %

Seasonal adjusted turnover indexSource: Statistics FinlandLatest information October 2019

2016 2017 2018 201920152014201320122011201020092008

Index 2008=100 Change: 1-11,2019 / 1-11,2018, %

-10 %

Seasonal adjusted volume indexSource: Statistics FinlandLatest information November 2019

2016 2017 2018 20192015201420132012201120102009200860708090

100110120130140150


Consulting Engineering in FinlandOrder books remain stable

According to preliminary data, the turnover of consulting engi-neering companies (industrial, social and construction expert services) in Finland grew by 5 per cent in 2019 from 2018. In 2019, their turnover in Finland amounted to EUR 6.7 billion.

In the October-December period, new orders in consulting engineering increased significantly from the previous quarter, while order books remained relatively stable.

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 21 per cent higher than in the preceding quarter and at the same level as in the corresponding period in 2018.

Value of Order Books in the Consulting Engineering in FinlandValue of New Orders in the Consulting Engineering in Finland

At the end of December, the value of order books was 1 per cent higher than at the end of September and 4 per cent lower than in December 2018.

Judging from order trends in recent months, the turnover of consulting engineering companies in early 2020 is expected to be slightly higher than in the corresponding period last year.

The number of personnel employed by consulting engineering companies in Finland grew by 5.5 per cent from the 2018 average. The industry employed some 56,200 people, up 2,900 from 2018.

Domestic Export Combined2017 20192018201620152014201320122011201020092008


Change: IV,2019 / IV,2018 IV,2019 / III,2019Export: +5 % -13 %Domestic: +1 % +25 %Combined: 0 % +21 %


0

604020

10080

140120

180160

220200


0

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300

400

500

600

50

150

250

350

450

550

650

Domestic Export2017 2018 201920152014201320122011201020092008 2016

700

Change: 31.12.2019 / 31.12.2018 31.12.2019 / 30.9.2019Export: -18 % -8 %Domestic: -2 % +2 %Combined: -4 % +1 %


Combined


According to preliminary data, the turnover of information technol-ogy companies (IT services and software) in Finland grew by 11 per cent in 2019 from 2018. In 2019, their turnover in Finland amount-ed to EUR 15.0 billion.

New orders increased significantly from the previous quarter in the October-December period and order books remained at a good level. Typically for the sector, order volumes fluctuate strongly from one quarter to another.

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 30 per cent higher than in the preceding quar-

Value of Order Books in the Information Technology* in FinlandValue of New Orders in the Information Technology* in Finland

ter and at the same level as in the corresponding period in 2018. Game industry and data centre companies are not included in the survey.

At the end of December, the value of order books was more or less the same as at the end of September and the end of Decem-ber 2018.

Judging from order trends in recent months, the turnover of information technology companies in early 2020 is expected to be higher than in the corresponding period last year.

The number of personnel employed by information technology companies in Finland grew by 5 per cent from the 2018 average. The industry employed some 74,100 people, up 3,400 from 2018.

Information Technology in FinlandSignificant increase in new orders

Change: IV,2019 / IV,2018 IV,2019 / III,2019Combined: -1 % +30 %

0

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*) Excl. game industry and data center companies

201920182017201620152014201320122011201020092008




Change: 31.12.2019 / 31.12.2018 31.12.2019 / 30.9.2019Combined: +1 % +1 %

0200400600800

1 0001 200

2 000

1 4001 6001 800

*) Excl. game industry and data center companies

2018 2019201720152014201320122011201020092008 2016



ECONOMIC OUTLOOK 1 | 2020Information based on the situation on 28 January 2020 Further information: Petteri Rautaporras, Chief Economist, phone +358 9 1923 358, +358 50 304 2220Jukka Palokangas, Senior Economist, phone +358 9 1923 357, +358 40 750 5469Please 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 10, P.O.Box 10, FI-00131 Helsinki | tel. +358 9 19231 | www.techind.fi

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