Employment in Finland likely to deteriorate

Private sector investment in Finland is at a 15-year low in real terms and there is no sudden improvement in sight. Not surprisingly, exports are a good leading indicator for domestic machinery investment, and with exports struggling machinery investment is unlikely to increase for another year. After a long decline the outlook for construction is somewhat brighter, although the difficult labour market probably still keeps a lid on demand, says Nordea Bank.

In the absence of economic growth, the prospects in FInland are not good for investment and the labour market. 

"Indeed, employment in the country is expected to deteriorate further and unemployment to rise. Forthcoming wage negotiations are likely to end up with unusually low wage increases. Thus, household sector purchasing power is not going to improve much in real terms, especially as the government is going to cut a wide range of transfers and benefits. Only very modest private consumption growth is therefore in the cards for the next couple of years", states Nordea Bank.

Low interest rates certainly support the consumer. Gasoline prices, on the other hand, react sluggishly to the drop in the crude oil price. Measured in euros, Brent is now roughly 50% cheaper than in midsummer 2014, while gasoline prices have barely fallen more than 10% due to a considerably large fixed tax levied on gasoline.