Finland's Output Gains Strongly in December

Finland sent 2021 out in style as its 3.1% gain in industrial output in December demonstrates. The gain is part of a series of indicators that now stretches back for six months. Output in Finland is gaining at a 17.3% annual rate over three months, part of an ongoing acceleration from 12-months to six-months to three-months. Utilities and manufacturing also follow this patten of sequential acceleration.

Mining and quarrying output is super-heated but not accelerating since its pace of 84.5% over six months is well ahead of its extremely strong pace of 44.2% over three months. Food production slowed over six months but growth in food output over three months is much stronger than over 12 months. And textile output has simply been gaining pace steadily from 12-months to six-months to three-months.

In December, all sectors and industries showed not just solid but strong gains. By comparison, November and October were a bit more uneven in their span of results.

Inflation has run hot in Finland as it has elsewhere in the EMU. Headline HICP inflation has asserted itself, rising from a 3.2% pace over 12 months and six months to 5.0% over three months. Core inflation has ridden up from 1.9% over 12 months to 2% over six months to 3.1% over three months. Compared to the EMU, Finland's trends are muted. Moreover, in December despite the heat in output from industrial production, inflation has cooled in with the headline dropping by 0.2% month-to-month and the core rising by just 0.1%. Finland's results are what the ECB and the Federal Reserve want desperately to see in their macro data. But the U.S. data for January show inflation acceleration. Finland is a special case.

Growth in the just-completed fourth quarter was strong at 11.2% for overall IP; all sectors were strong except for food where production slipped at a 0.8% annualized rate in the fourth quarter.

The chart at the top of this report shows the level of IP in Finland and how it has performed. The table calculates January 2020 to date data on performance. The ratios in the table show that IP has gained sharply since just before Covid struck (except for mining and quarrying). And the chart affirms the strength in the output rebound. Finland looks to have completely recovered (even relative to trend!) from the Covid smackdown. However, output is still undershooting relative to its previous trend because Finland was hard hit in 2019 when there was a global trade slowdown in the wake of the Trump tariffs on China. Finland still is not back from that set-back. But it is doing well, and it seems to have put the economic impact of Covid behind it despite ongoing infections.

Having said that, Finland has a very late-December/early-January hit from the wave of virus infections. But Finland also has an unusual pattern since every other country that has been hit by Omicron has had a flurry of infections but a lower peak than in the past. Finland is experiencing its highest peak of infections from the virus ever- although there is a hint that this wave is subsiding. What's worse is that death curve is also making new highs and seems to see rising with little lag. That is very unusual. Omicron has been less impactful in other countries and the death curve has not risen as much even when the infection curve rose sharply. Despite this new broader wave, Finland is experiencing protests against Covid restrictions too (seehere). Even where the virus is active, people have become fed up with restrictions. It's true in Finland, France, the U.K., Canada, the U.S., and many more places, I'm sure. It looks like we are headed for fewer restrictions on economic activity globally (well, maybe except for China), but it remains to be seen how people in mass will react to that.