The industrial sector in Finland has experienced a significant downturn in June, with the value of new orders for factories operating in the country's industrial companies dropping by 12.2% compared to the previous year. Apart from the food industry, production contracted in June across all main sectors compared to the previous month. Experts are warning that the current challenges are likely to persist, as tightening monetary policies and a weakened economic situation in the eurozone continue to impact investments and consumer spending, indirectly affecting Finland's economy.
According to Jukka Appelqvist, Chief Economist at the Central Chamber of Commerce, the weakening industrial conditions resemble a slow-leaking ship that's proving difficult to repair. So far, production within the factories has been sustained reasonably well based on earlier orders, but order backlogs are steadily depleting. Unfortunately, there's no immediate relief in sight for the industrial downturn, as several headwinds are expected in the upcoming months.
The value of new orders for factories operating in Finland was down by 12.2% compared to the previous year. Overall, order value dropped by 6.7% in the first half of 2023 compared to the previous year.
"Industrial conditions are like a slowly leaking ship that we can't seem to fix. While production has been running reasonably well based on previous orders, the order backlog is diminishing steadily. Unfortunately, there doesn't seem to be an end in sight for the weakening industrial conditions, as several challenges are on the horizon for the fall," said Jukka Appelqvist, Chief Economist at the Central Chamber of Commerce.
The decline in order value was observed across all major sectors. The steepest decline was seen in the chemical and paper industry. The metal industry also experienced a decrease in order value, albeit less dramatically.
"Industrial production has managed to hold up relatively well given the prolonged weakness in new orders. However, going forward, the momentum is likely to diminish as tightening monetary policies and the overall weak economic situation in the eurozone impact investments and consumer spending, which will indirectly affect Finland's economy as well," Appelqvist emphasized.
Industrial production also saw a decline in June. The combined production volume across all industrial sectors contracted by 3.3% compared to the previous month and dropped 6.1% below the level of June in the previous year.
The contraction in production was widespread in early summer. Except for the food industry, production contracted across all main sectors in June compared to the previous month. Overall, the forestry industry has been hit the hardest.
"While the structure of Finland's industry is focused on investment goods and intermediate products, and economic shifts do not affect us rapidly, the deteriorating economic situation in the eurozone has been impacting the industrial sector for an extended period, and this impact is increasingly affecting domestic industrial export demand as well," assessed Appelqvist.