Weekly Web Release from the Ministry of Finance, November 07, 2002

Weekly Web Release
November 07, 2002

Survey of corporate return
The Ministry of Finance, the Central Bank of Iceland, and IMG Gallup have in co-operation begun a project to, on a regular basis, perform surveys of the position and future prospects among the largest companies in Iceland, as well as the view of the economic outlook among their executives. These surveys are expected to become an important part in estimating production, demand and expectations. Surveys of this kind are common in other countries, and are an essential part of business indicators among different sectors and industry. Equally, similar surveys are done among consumers, which Gallup has done since March 2001.

The findings of this first survey are now available, and the aim is to perform these measurements bi-annually. The sample is taken from the top 400 companies in Iceland. The response rate was 317 answers, or 81 per cent. The questions posed were with regard to evaluation of the current economic conditions as well as prospects for the immediate future, as well as number of staff, turnover, labor cost, stock, and investment. Also, the survey posed questions about interest and inflation and the expectations of companies in that area. The responses were grouped by location, industry, turnover and staff size. Companies are indexed by five groups: retail and service, fishing, industry and production, finance and insurance, and transport and tourism.

The findings show that there is general optimism towards the economic conditions, and even more so towards the future. The urban areas considered the present conditions better than the capital area did, but those expectations changed when considering the immediate future of 6 - 12 months. The fishing industry is the only industry in which many respondents expect the operating conditions to deteriorate during this period, where 27 per cent projected this for the coming year. Many respondents were somewhat more optimistic, as 32 per cent expected the conditions to be slightly better.



With regard to company turnover and profits, 24 per cent of companies regarded the results for this year to be lower than the previous year, while 47 per cent believe the turnover to be higher, and 50 per cent project an increase in profits. Companies within the capital area expect more profits than what the urban areas expect. Expectations matched between urban and capital areas for turnover increase. Companies in the transport and tourism sector expect the greatest increase in turnover, while companies in the industry and production sector expect a downturn.

According to this poll, 61 per cent of companies excpect the prices on their products and services to remain steady for the next 6 months, whereas 31 per cent expect an increase. On average, companies expect an increase of 0.8 per cent. Companies however expect their supplies to increase in price on average by 1.7 per cent over the next 12 months, 13 per cent of companies expect it to remain the same, and on average companies expect the inflation rate to be 2.6 per cent.


Import
The weekly web release dated October 3d, highlighted indications that the economic downturn in Iceland is coming to an end, where a slow increase in imports is the main indicator. Import of goods in October as measured by the collection of value-added tax supports this.


General imports – Fixed prices


Import during the past months has increased slightly compared with the same months of the previous year. Examining the three-month average of imports at fixed prices (see graph), import appears to be approaching a balance after a downturn that peaked at the beginning of this year. For example, imports are now more than in 1997, yet less than in the upturn period in the following years. Estimated imports in October measued in real terms was about 4 per cent higher than the same period last year. This is not a question of some sudden change, but more a slow increase as mentioned previously. However, figures for the past 6 months indicate that a balance has been reached, and that the contraction period is over.


For comments and/or suggestions, send e-mail to:
"bolli.thor.bollason@fjr.stjr.is"
or contact the Ministry of Finance,
Weekly Web Release, Arnarhvoll, 150 Reykjavik, Iceland