Economy weakens – construction and manufacturing worst hit

Compared to the same period in 2023, the economic situation has improved slightly but deteriorated since the previous quarter. Slower growth is affecting the construction and services sectors, with manufacturing companies experiencing a recessionary state. The commerce sector, however, shows more positive figures compared to the previous quarter.

Bankruptcies continue to rise. Between July and September 2024, 209 companies in the region went bankrupt, an increase of 18% compared to the same period last year.

Expectations are that the Gothenburg region’s economy may reach a more normal state by the end of the first half of 2025, at the earliest.

Weaker growth and rising unemployment

Unemployment continues to rise. The Gothenburg region now has about 4,000 fewer people employed compared to last year, with unemployment rising to 6.3%. Nationally, the unemployment rate was 6.9%.

“Job growth has lost momentum over the past year and is now showing negative growth. Our expectations are that job growth will slow further through the remainder of 2024. Job growth is not expected to become positive again until around mid-2025,” says Peter Warda, senior analyst at Business Region Göteborg.

Declining exports affecting manufacturing

The economic tendency for manufacturing companies has fallen to 89.8, suggesting a recessionary state. Companies face a challenging period with weakening export markets and reduced demand. Production volumes increased only marginally in the third quarter despite high capacity utilisation. The number of employees has increased somewhat, and profitability is reported to have risen slightly. Looking ahead, however, manufacturing companies are more pessimistic and expect a decline in production volume in the last quarter of the year. Three out of four companies report that a low demand has limited their production.

The Gothenburg region’s services sector has also weakened compared to the previous quarter. Three out of five companies in the services sector report that poor demand is limiting the operations. More companies reduced their staff count in the third quarter than increased it. Despite the somewhat gloomy outlook, there are signs of optimism, with expectations of increased demand in the next six months. However, many still anticipate further staff reductions in the year’s final quarter.

The construction sector continues to struggle with weak demand. In the third quarter, seven out of ten construction companies reported a decrease in construction volumes. Many companies also see falling tender prices adding to market uncertainty, while others report that financing difficulties are hindering construction. As a result, more construction companies have reduced their workforce during the period. Despite the challenges, many expect tender prices to increase slightly in the fourth quarter, with cautious optimism for the longer term.

Commerce the strongest performer

The commerce sector is relatively strong, with increased sales volumes during the third quarter. The economic tendency indicator suggests a "normal-strong" economy. However, profitability continues to decline, likely due to higher costs and squeezed margins. Employment has stabilised in the sector, with more companies hiring than reducing staff. 

“The slowdown we see in the Gothenburg economy is mainly due to companies’ concerns about weaker global demand in the future. Domestically, however, the outlook is more positive, as households benefit from lower interest rates. The retail sector is optimistic, at least regarding volumes,” says Henrik Einarsson, director of business establishment and investment at Business Region Göteborg.

Read the report Economic Outlook #4 2024 or download the presentation material