Business cycle expectations have darkened exceptionally quickly

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“We must not let the general pessimism get us down, even though each company and person assesses the situation from its own individual perspective. Careful deliberation and far-sighted politics are needed now more than ever.”
      This advice by Leif Fagernäs, Director General of the Confederation of Finnish Industries EK, seems reasonable to anyone who has studied the latest cyclical barometer published by EK, for the survey gives reason for little else than widespread doom and gloom.
      The EK barometer, Finland’s most respected business tendency survey, has measured the sentiments within the Finnish business community since 1966. The extensive survey is published quarterly, so the previous edition came out in July.
     
Compared with July's findings, the outlook has now turned considerably bleaker. The barometer takes into account three main lines of business, namely industries, construction, and services. These have then been divided into 14 subcategories.
      The business cycle and personnel development expectations of all the main fields and subcategories have been presented graphically. Apart from two exceptions, the conceived 34 curves all point downwards like a cow’s tail.
      The only exception is traffic. Its business cycle and personnel development expectation graphs still describe an upward trend, albeit that the accompanying text warns that even in that field the economic trend continues to weaken.
     
Of the main business fields, construction is experiencing the sharpest decline. The personnel development in the field turned negative already three months ago. The decline is expected to get worse in the coming months, even if the normal monthly fluctuations are ignored.
      The EK business tendency survey’s greatest common denominator in all fields is the expectation of a fall in demand. It has quickly replaced the availability of competent workers as the greatest concern within businesses.
     
Fagernäs therefore calls for “careful deliberation and far-sighted politics” especially to keep up the demand. According to the director-general “so much once again depends” on the behaviour of Finnish consumers.
      In Fagernäs’s view, “for both structural and economic policy reasons the government should stick to its promises concerning tax relief and continue to focus on lightening the tax burden in the coming years.”
      This, combined with inflation that is slowing down, will cause the real earnings of wage earners to increase by over 2 per cent next year.
      In this way the consumers can once again “grease the wheels of the economy and significantly minimise the damage caused by the recession”, as Fagernäs puts it in an EK press release.
      But this may not be enough.
      The Confederation of Finnish Industries therefore also calls on the government to “utilise all means available to promote the competitiveness of companies and the business environment for the export industry”.


Previously in HS International Edition:
  Finnish SMEs anticipate gradual decline to continue (21.2.2008)

Links:
  EK press release, 6.11.2008: Survey reveals bleak outlooks, particularly in construction
  EK press release: Fagernäs´s comment on the economic situation

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