Nordic construction and civil engineering market
Late cycle growth and weaker inflation
The global business cycle was characterized in 2018 by several late cycle driving forces like a strong labor market, rising investments, high capacity utilization and recruitment difficulty. Growing concern for a recession combined with unforeseeable political gambits from the US and uncertainty about the effects of a trade war between the US and China contributed to the decline in global financial markets at the end of 2018, which meant the year began and ended with weak economic cycle data. Despite all this the global economy on the whole grew on par with 2017. Both the Eurozone and China slowed while growth in the US accelerated. The global economy is expected to slow in 2019 and level out in 2020. The slowdown is expected to be widespread and affect China and the US as well as Europe. Despite a strong labor market and the belief unemployment will continue to contract, salaries are rising at historically low rates. This, together with an increasingly global market in goods and services, digitalization and aging populations, is expected to keep the underlying inflation pressure at bay. It should also mean that interest rates remain low.
The economy in the Nordic countries
Sweden’s growth rate accelerated another notch in 2018. However, private consumption growth abated as did total investment volumes, primarily due to a decline in housing construction. While capacity is still at a shortage and recruitment difficulty continues, in both industry and the service sector it is becoming clear that we are now descending from the peak of the economic cycle. Although there is only a modest decline in growth, uncertainty factors and financial imbalances can have a dramatic effect during a slowdown. Examples of these factors are the ongoing trade wars, concern that the US economy will put on the brakes and Brexit. However, weak inflation signals indicate that interest rates will continue to be very low in both 2019 and 2020. Expansive fiscal policies and a weak Swedish krona can counteract a severe decline in the Swedish economy.
The Norwegian economy grew in 2018. Household finances were favored both by higher employment and rising real incomes, and the growing interest in the oil industry to invest sent positive impulses to the rest of the business world. Unemployment dropped and is expected to continue to contract over the next two years, which is good for private consumption. GNP growth in 2019 and 2020 is expected to remain above the normal trend. Private consumption and gross investments will probably drive this financial growth. At the same time stricter monetary policies and the resulting rising interest rates could very well have a dampening effect. A stronger Norwegian krone could also work negatively for the country’s export industry.
After good growth in recent years a slowdown in the Finnish economy is now anticipated. However, the forecast predicts growth in 2019 and 2020 will remain above the normal trend. The Finnish economy has been bolstered by strong domestic and international demand but when the global economy slows domestic consumption and investments will have to become the driving forces. It looks like unemployment will continue to drop and it is possible salaries will rise slightly as well. Capacity utilization is high in industry which normally entails more investments. Other business is sending similarly positive signals. Public finances have improved during the past few years thanks to both savings and a stronger economy and this can lead to more public consumption in the future.