'Manufacturers inclined to increase output'

Manufacturers are expecting to increase production over the coming months, according to the FOI industry surveys for January and February. The number of firms confident to increase output has risen gradually since last December to reach the highest...

However, this confidence should be interpreted with care. Indeed, a large number of manufacturers are predicting increases in production normally related to seasonal adjustments.

At the same time, respondents are anticipating that demand conditions facing the sector will remain weak. In fact, looking ahead to the next quarter, most manufacturers also expect to reduce selling prices in their bid eventually to increase order book levels that have been decreasing for the past three months.

Stocks of finished products for the four months running from last November were reported above the survey's historical average. Besides, the surveys also reveal that the number of firms predicting a fall in their employment levels increased between last December and last month.

Developments by industrial groupings

A breakdown by industrial groupings shows that, both in January and February, the Consumer Goods Sector, the Intermediate Goods Sector, and the Investment Goods Sector, all registered positive production expectations. Furthermore, the three sectors recorded a gradual increase in the number of firms expecting output to grow since last December.

In terms of order books, the Consumer Goods Sector registered an improvement last month, even though they are still quite weak. Correspondingly, the Intermediate Goods Sector registered a substantial decline, while the Investment Goods Sector improved in January and slid back again last month.

Stocks of finished products

In the first two months of 2006, stocks of finished products for the Investment Goods Sector were recorded at slightly "below normal" levels. On the other hand, stocks of finished products were registered at "above normal" levels for the Consumer Goods Sector and even more so for the Intermediate Goods Sector.

The Consumer Goods Sector experienced an increase in the number of firms registering "above normal" levels of stocks of finished products; the Intermediate Goods Sector underwent an opposite trend.

Selling price expectations

Last month, the Consumer Goods Sector recorded an increase in the number of firms predicting a rise in selling prices compared to the preceding month.

However, there were more firms in the Investment Goods Sector and the Intermediate Goods Sector predicting a fall in selling prices for the three months to follow, rather than predicting an increase.

In both cases, the number of firms predicting a fall in selling prices last month declined when compared to the previous month.

Employment expectations

Last month fewer firms in the Consumer Goods Sector expected to decrease their total employment when compared to the January survey results. However, the February survey registered a slowdown in hiring expectations of the Investment Goods Sector, and a marked deterioration in employment expectations for the Intermediate Goods Sector.

The January Industry Survey was carried out between January 3 and 30; 194 manufacturers, employing 12,444 employees, replied to the survey. The February Industry Survey was carried out between February 12 and 27; 196 manufacturers, employing 12,602 employees, replied to the survey.

The monthly industry surveys are intended to monitor the activity, perceptions and outlook of manufacturing industry in Malta, and are being undertaken under the Joint Harmonised EU Programme of Business and Consumer Surveys.

The surveys are carried out using a statistically representative sample of manufacturing firms in Malta. Responses to the surveys are weighted by employment, with the results for analysis being given in weighted average form of higher, the same, lower, and always adding up to 100.

The data is interpreted by using the balance of positive over negative responses to 'measure' the trend for the month. NACE Headings are also categorised under three broad sectors: Consumer, Investment and Intermediate Goods.

For more information on the sectors classification (NACE Rev. 1) and the allocation of NACE Headings under these sectors (also referred to as the Main Industrial Groupings - MIGs), i.e., the production of Consumer Goods, Intermediate Goods, and Investment Goods, readers are to contact the FOI Secretariat on tel: 2122-2074 or 2123-4428.