Finland Logs a Strong IP Gain Tagged onto an Erratic Annual Trend

The year-on-year trend depicted in the chart on Finland’s IP growth shows an erratic recovery. Finland’s IP nose-dived during Covid as IP did across the world. It similarly staged a strong post-Covid recovery. But after seeing growth peak early in 2022, the pace of output expansion has slowed steadily and even seen year-on-year results flash between logging expansion and contraction in recent months.

In May output logs a 2.5% month-to-month gain after falling by 2.1% in April and rising 2.8% in March. But on the back of this monthly chop and year-on-year erratic behavior, the sequential growth rates are looking very solid, showing year-on-year output up by 1.2%, a gain at an 8.1% pace over 6 months then up to a 13.3% annual rate pace over 3 months. Still, IP excluding construction is only up at a 0.6% annual rate two months into Q2 2023. Manufacturing output is falling at a 1% annual rate in the unfolding second quarter as well - a complicating offset to sequential strength.

Utilities output is accelerating and exploding sequentially culminating in a 97.7% annual rate of increase over 3 months. But mining & quarrying output is tanking – not in a clear decelerating profile - but still falling at a 65.7% annual rate over 3 months.

Manufacturing shows sequential acceleration with output up 0.7% over 12 months, at a 3.6% pace over 6 months and at a 9.8% pace over 3 months. Still, both food-output and textile-output show weak performance.

Finland’s HIPC gauge is in a clear decelerating pattern in what is a now also common global pattern. While it is joined by deceleration in the core HICP as well, the core pace is much more stubborn with the pace slowing to only a 4.2% annual rate over 3 months. The performance of the HICP headline and core also are quite different in each of the last three months.

Summing up Finland’s industrial sector is looking more solid on its sequential profile. Still, the annual trend suggests that this is strength in its infancy and may not have staying power despite the appearance of sequential momentum that emphasizes that current strength has been building. This strength is not backed up by any sort of annual momentum. In surrounding Europe, output trends remain challenging, inflation is high, and war rages on between Ukraine and Russia. The ECB still has a good deal of work to do because of EMU-wide inflation. There are reasons to be somewhat circumspect about what seems to be a strong sequential showing in Finland in May.