Finland’s business sector showed further signs of recovery in July, with confidence improving across manufacturing, construction, services and retail. At the same time, consumer sentiment remained weak as households continued to limit spending and expressed concern about unemployment despite a brighter outlook for the economy.

The findings come from a new survey by the Confederation of Finnish Industries (EK) and Statistics Finland data.

Business confidence strengthened for the second consecutive month. Manufacturing confidence rose from +4 to +7 in July, moving above its long-term average for the first time in several years. Construction recorded the strongest monthly improvement, with its confidence indicator climbing from -17 to -5 after a prolonged downturn. Services edged up from +6 to +7, while retail trade remained stable at +12.

Manufacturers reported that production is expected to continue increasing during the coming months. Order books remained close to normal levels, inventories fell and 68 per cent of companies said they were operating at full production capacity.

Construction companies also reported stronger order books after a long period of weak demand. Employment in the sector is expected to remain stable during the coming months.

Retail businesses continued to report rising sales and positive expectations for the months ahead, while service companies said business activity had remained steady and sales continued to grow at a moderate pace.

The quarterly Business Tendency Survey by EK also pointed to broader economic improvement.

More than 1,000 companies employing around 260,000 people took part in the survey. Businesses reported that manufacturing output increased across a wide range of industries during the early summer, while construction returned to growth from a low base and service sector sales continued to expand.

Companies also became more optimistic about the rest of the year. Output is expected to continue growing through the remainder of 2026, while employment expectations have turned positive after a long period of decline.

Penna Urrila, Director and Chief Economist at EK, said the recovery had become more widespread despite continued uncertainty in the global economy.

“The results of the Business Tendency Survey indicate that economic growth in Finland has strengthened and become more broad-based despite the considerable uncertainties facing the global economy,” Urrila said.

He added that improving employment expectations were an encouraging sign after an extended period of weakness.

Despite the stronger outlook, businesses continued to identify weak demand as the biggest obstacle to growth. More than half of respondents, or 53 per cent, said insufficient demand was limiting their operations.

Manufacturing companies also reported increasing labour shortages and tighter production capacity as activity picked up.

EK warned that several international risks continue to weigh on the outlook. Urrila pointed to continued tensions in the Persian Gulf, persistent inflation, expected interest rate increases, uncertainty surrounding international trade policy and the war in Ukraine as factors affecting Finnish businesses.

While businesses became more optimistic, consumers remained cautious.

Statistics Finland said the consumer confidence indicator stood at -5.3 in July, unchanged from June but stronger than the -10.5 recorded in May. The reading nevertheless remained below the long-term average of -2.9.

More than half of respondents, 53 per cent, said Finland’s economy was weaker than a year earlier, while only 14 per cent believed it had improved.

Looking ahead, 27 per cent expected the national economy to improve during the next year, while 30 per cent believed conditions would deteriorate.

Only 15 per cent considered it a good time to buy durable goods, while intentions to make large purchases fell further. Just 11 per cent planned to increase spending on durable goods during the next year, compared with 39 per cent who expected to reduce spending.

Plans to buy homes also remained below normal levels, with only 11 per cent considering purchasing a property or building a house within the next year.

Expectations for the labour market also remained weak.

Half of respondents expected unemployment to increase during the next 12 months, while only one in five believed it would fall.

Regarding inflation, people estimated that prices had risen by 4.5 per cent over the previous year and expected inflation to slow to 3.7 per cent over the coming 12 months.

Consumer confidence was strongest in the Greater Helsinki area, where the indicator stood at -1.2. Northern Finland recorded the weakest reading at -10.6.

Pertti Kangassalo, Senior Statistician at Statistics Finland, said consumer attitudes had yet to reflect the recent improvement seen in economic indicators.

“Consumers are still somewhat out of step with the recent positive economic news. General uncertainty is likely to be the main reason. The economic and political climate remains quite gloomy and uncertain both internationally and in Finland,” Kangassalo said.

HT