Corporate sector profitability is solid. Companies are borrowing and investing. There is strong growth in employment, unemployment has fallen markedly, and household demand continues to rise. Capacity utilisation in the business sector is high and a growing number of enterprises are now facing constraints. Statistics Norway’s business tendency survey for the second quarter shows that Norwegian manufacturing is optimistic about the prospects ahead. A clear majority of industrial leaders assess the general outlook as more positive in the short-term than in the second quarter. At the same time, consumer price inflation excluding energy products remains low and is lower than the inflation target. Employment growth was lower over a long period compared with the cyclical upturns in the 1980s and 1990s. During the first phase of the upturn, output growth was largely attributable to a sharp increase in person-hours worked. This partly reflected a marked increase in average working hours when sickness absence declined in 2004. Higher activity did not therefore result in substantial labour market tightening. Considerable labour inflows following the enlargement of the EU and the EEA in 2004 also contributed to increasing potential output. A substantial share of inward labour migration is accounted for by foreign companies with contracts in Norway. Labour inflows from the new EU member states still appear to be growing, with the construction industry absorbing a particularly large share. On the other hand, a rise in sickness absence and the number of persons on disability benefits are pushing down production capacity this year.

In this case, the global factors that have affected commodity prices are compounded with supply conditions that have had a major impact on prices over the last year and a half. Considering all these factors, the outlook for the price of crude oil in the next two years has been also reduced significantly, to an average of 46 dollars per WTI barrel and 48 dollars the Brent. In September we were projecting prices of 53 and 58 dollars for the two oils. For some months now, external financial conditions have been less favorable for the Chilean economy. The preamble to the US monetary policy rate adjustment caused significant volatility in financial markets. However, the increase of last week had a cool reaction of the markets. In Latin America the mix of worsened economic prospects and idiosyncratic factors has fueled the rise in risk premiums, but in Chile this rise has been smaller (figure 5). Moreover, the projected growth of our trading partners in the period 2016–2017 has been downscaled marginally compared to what we expected in September. The developed world, particularly the United States, shows a sustained recovery. Meanwhile, the emerging world has slowed further. In China, fears of a deeper slowdown and turmoil in financial markets have eased, but the Chinese economy has decelerated, with some weakness in the manufacturing sector. Latin America faces a complex situation, particularly Brazil which is going through its worst recession in decades. The loss of its investment grade last week reveals the difficulties of this economy.