Fighting The Reality

This week to major Norwegian organisations have presented their outlook for 2010. Norway’s leading bank DnB NOR calls of the financial crisis in their report and sees a moderate growth for the country’s industry, while the Organisation of Norwegian Industries, Norsk Industri, fears the worst economic period in 20 years. Are these people even on the same planet?


“We believe that both estimates for petroleum investment and expectation of increased investment in power supply (renewable) is overrated this year. Norwegian industry insists therefore that the SSB and Norges Bank immediately go deeper into the reality of the figures on these two important areas.”

Norsk Industri

(Article in English, links to original reports in Norwegian)

Norway’s leading bank DnB NOR presented its report on the economic outlook Tuesday morning. The bank estimates an average industrial growth around 2% this year and the next,  and concludes that “The Big Recession” is over. However, The Association of Norwegian Industries believes the numbers are wrong and says the worst period for Norwegian businesses in over 20 years is yet to come.

It’s kinda mystical that economists in a small country like Norway can have so different views on the economy.

Let’s start with the bankers:

“The period of free fall in activity in the global economy now seems to be over,”  Chief Economist Øystein Dørum at DnB NOR Markets concluded when he and his team of analysts presented their latest report, “Økonomiske Utsikter 1/10”, Tuesday morning.

But Mr. Dørum emphasized that the crisis is not over. However, he said, “The great recession” is now history.

In the report Dørum & Co. draws a picture of developments in the first four months of this year where the world economy is again growing, and that the governments measures have worked.

Many conditions are favorable for the growth to continue at quite a high pace,” Mr. Dørum writes.

“The Dynamics of The Upswing”

Perhaps the most important factor, according to Mr. Dørum,  is what is called the “upswings own dynamics”; optimism and appetite for risk leads to increased demand and increased activity, and in the next round to further strengthen of  faith and future demand.

“Companies will want to expand, taking market share and boost earnings, and households would in turn increase their consumption,” the Chief Economist writes.

This dynamic is also reinforced by low interest rates and the rapidly rising asset prices.

Also pent-up demand will help to give the upswing extra speed.

Overall, DnB NOR Markets believes that the industrial countries will grow by slightly in excess of two per cent both this year and the next.

Here’s the full report from DnB NOR Markets. (Only available in Norwegian).

On The Contrary….

Today the Association of Norwegian Industries, Norsk Industri, presents their outlook for 2010.

The organisation starts of with the following message:

“We believe that both estimates for petroleum investment and expectation of increased investment in power supply (renewable) is overrated this year. Norwegian industry insists therefore that the SSB and Norges Bank immediately go deeper into the reality of the figures on these two important areas. When we do, it’s because any factual errors lead to wrong policies and for strong exchange rate in a year when the industry is particularly vulnerable to this type of effects.”

The Business organisation goes on writing:

“2009 was a dramatic year for the industry in Norway and in many other countries. In Germany fell eg. Part production by 25 percent. In Norway exports went down by 20 percent. With the trend growth over the last 20 years it will take 17 years before production in Germany is back to the level before the crisis occurred. It says much about the challenges of international and home to come.”

“Although we see considerable agility in many industries and individual companies, it is raised no doubt that 2010 will be a demanding year for the industry in Norway. Our member companies alerts investment decline in the current year. Revenue growth is at best marginal.”

The Norwegian industry association divided their members into three categories:

1. “Some are almost back to normal level of turnover. Among these will increase employment in small in a first phase, due to continued excess capacity. These are companies that sell the most to the Norwegian market and companies that have largely exported to Asian customers. There growth pause was brief, and the markets are again good.”

2. Other industrial companies are struggling with the aftermath of the crisis. For many of these the growth the last six months of 2009 was so small that they are still on the critical level in respect to survival.”

3. “A third category of companies are those who so far have been sheltered from the crisis because of the large order book when the crisis occurred. These are now entering a period of thinner order books and few new orders. In particular, the supplier industry, shipping companies and oil companies. Finally, customers are well represented here. The part of the offshore investments, that are of most relevance for the supplier industry, fell by 25 percent this year. This will have consequences for employment and activity.”

The Energy Intensive Industry

Most members of Norsk Industri are related to the all-important Norwegian Oil Industry.

In a special chapter about this companies the association writes:

“The reduction of energy-intensive manufacturing in Norway in 2009 is twice as large as in comparable countries. Power consumption in these sectors is at the end of 2009 the lowest since 1982. There are still several large companies temporarily closed. This year particular political power contracts will phase out most of the elderly. Many of the intensive factories in operation in today is built in the 70’s and near the end of its economic life. Decisions to be taken in the next few years will determine if energy-intensive manufacturing will continue to be one of the largest sectors in the industry.”

Wrong Estimates – Wrong Policies

“We believe that both estimates for petroleum investment and expectation of increased investment in power supply (renewable) is overrated this year. Norwegian industry insists therefore that the SSB and Norges Bank immediately go deeper into the reality of the figures on these two important areas. When we do, it’s because any factual errors lead to wrong policies and for strong exchange rate in a year when the industry is particularly vulnerable to this type of effects.”

(SSB – The Norwegian Bureau of Statistics)

“The krone exchange rate in January is almost as strong as it was in 2002-2003 and in 2007-2008. The interest rate differential relative to other countries is a dilemma for the Governor in front of each monetary policy meeting at Norges Bank and the Prime Minister in relation to the state budget for 2011. For industry is a strong krone and a separate Norwegian interest rate scenario in relation to the euro zone agreed to reinforce the problems related to the profitability and competitiveness.”

“The labor costs for workers in Norway is located at 143 percent of the average of competitor countries, is a major challenge.”

“The Association of Norwegian Industry is highly critical of the expansionary government budgets, we have seen in recent years. No one has ever spent more money than government budgets than the Stoltenberg-government in recent years. Expansionary budget is in itself helps to make the situation difficult for export industries.”

Here’s the full report from Norsk Industri. (Only available in Norwegian)

Disturbing Facts

Here’s some of the disturbing facts that The Industry Associations points out.

(Old News, really, but they obviously need to be repeated).

New Orders in the Norwegian Shipping Industry:

The Norwegian Labor Market:

(Blue candle sticks: Investments per full time worker. Red line: Costs per full time worker. Yellow line: Employment rate)

Company revenue:

(Blue sticks: Domestic markets. Yellow sticks: Export markets)

Industry employment:

Use of Oil Industry revenue to subsidize the national budget:

Related by The Econotwist:

Has The Double-Dip Already Arrived?

And The Euro Came Tumbling Down

ZEW: “Not A Clear Upswing”

Has The New Year’s Rally Derailed?

Norwegian Up- and Downgrades

Norway’s Prime Minister Fears Social Unrest

Central Bank of Norway raise interest rate again

C.B.of Norway: “All Banks Must Be Allowed To Fail”

Norway: Most Banks Fail In Stresstest

Reason To Worry

Norges Bank urges banks to reduce liquidity risks

Norway’s New Bubble

Roubini: “The Worst Is Yet To Come”

Robert Schiller: – Recovery is just luck

The Banks Are Bursting

“The Norwegian Syndrome”

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0 thoughts on “Fighting The Reality

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