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ECONOMY

Swedish ball-bearing giant slashes 2,500 jobs

Sweden's SKF, the world's biggest maker of industrial bearings, announced on Monday it was cutting 2,500 jobs, a move widely regarded as a tell-tale sign of tougher times ahead for the manufacturing industry.

Swedish ball-bearing giant slashes 2,500 jobs

SKF launched a cost reduction programme in 2010 and now aims to reduce annual costs by 3.0 billion kronor ($464 million) by the end of 2015, including 1.5 billion for the years 2012 to 2015, it said.

“This will impact some 2,500 people primarily through early retirement and other voluntary and agreed reductions,” SKF said in a statement.

The company’s profits were down by a fifth last year.

SKF, which also makes sealants, is an important supplier to many parts of the industrial processing chain and is therefore regarded as a leading indicator of activity in manufacturing and machine tooling.

It has reported a drop in net profits for four quarters in a row. In the third quarter of 2012, it registered a net profit of 1.23 billion kronor, down 23 percent from a year earlier.

“We had a bad December, especially in the automobile market in Europe but also in North America and Asia,” company spokeswoman Ingalill Östman told the business daily Dagens Industri.

“We expect it to continue at this lower level at the beginning of this year,” chief executive Tom Johnstone said, adding that inventories were lowered by more than 600 million kronor.

Johnstone said SKF would report restructuring costs of 200 million kronor in the fourth quarter, as the first step of the programme and 100 million kronor for impairments and write-down of assets.

The annual savings from the first step would be 150 million kronor, and affect some 550 people primarily in Italy, Sweden, Ukraine and the United States.

The fourth quarter report is due to be published on January 30th.

AFP/The Local/at

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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