THE OUTLOOK for Finnish technology industries has become more clouded.
The Technology Industries of Finland on Thursday reported that the number of new orders and tender requests has decreased sharply – including “staggeringly” in mechanical engineering – according to its latest order book and personnel survey.
The survey found that the value of new orders decreased by 24 per cent quarter-on-quarter and 30 per cent year-on-year between July and September. As the value of new orders has been declining steadily since the beginning of the year, order books in the technology industry thinned by four per cent between late June and late September and 13 per cent between September 2022 and September 2023.
Technology industries account for approximately half of Finnish exports.
Petteri Rautaporras, the director and chief economist at the Technology Industries of Finland, interpreted the decline in new orders as a harbinger of significant challenges in the winter and early spring. Although the strong order books of companies will continue to support production in the coming months, he added, the situation of export companies could deteriorate considerably next year without a demand recovery.
The third-quarter decline in new orders was particularly rapid in mechanical engineering, the largest sub-sector of technology industries: 39 per cent from the previous quarter and 40 per cent from the previous year.
Rautaporras highlighted that mechanical engineering is typically the most accurate indicator of the health of all technology industries.
“We haven’t seen this dramatic a drop in order intake in ages. In a word, order intake in the third quarter was appallingly bad,” he was quoted saying at a news conference on Thursday by Helsingin Sanomat.
With the lack of new orders likely thinning order books in the winter, technology firms may scale down production and adjust their staff during the winter months.
“A strong order book won’t support you forever,” reminded Rautaporras.
The Technology Industries of Finland reported that the tender request balance figure for the industry eroded to -31 between June and September. Although the data collected last month are not as bleak as during the financial crisis or coronavirus pandemic, they do indicate that the demand environment deteriorated noticeably in the third quarter.
“The figure suggests a dramatic and extremely broad change in the demand environment. We’ve seen a clear turn for the worse,” he summarised.
He pointed out that, at least for the moment, the eroding situation seems to be attributable to normal economic cycle linked to higher interest rates. The order intake of technology firms may also be a consequence of clients overstocking their warehouses during the pandemic and the deflationary development of certain industrial inputs.
“Parties making purchase decisions may be thinking that if they wait a bit longer they can get the products cheaper. These sort of very harmful elements of deflation are in the air,” remarked Rautaporras.
As the factors holding back demand are all temporary, he argued that it would be premature to speak about a broader economic crisis.
“The extremely weak quarterly order intake that we detected can nonetheless be regarded as a warning that something more serious may be ahead of us,” he added at the news conference.
Aleksi Teivainen – HT