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Gross domestic product grew by 5.5 per cent

According to Statistics Finland's preliminary data, the volume of Finland's gross domestic product grew by 5.5 per cent in 2006 and totalled EUR 168 billion.

In the last quarter of the year gross domestic product increased by 0.9 per cent from the previous quarter. Compared to the corresponding time period of the previous year the growth amounted to 4.5 per cent.

The previous year's industrial dispute in the paper industry contributed partly to the growth recorded in 2006. There were two fewer working days in 2006 than in the year before. These preliminary data are based on information available on 20 February 2007 on economic development during last year.

Strong growth recorded in manufacturing and trade

The volume of primary production contracted by 1.5 per cent from the year before. Value added in agriculture barely rose from 2005. Forestry declined by 3.5 per cent year-on-year even though its value added showed growth in the second quarter because of the industrial dispute in the paper industry in May/June 2005.

In secondary production, value added went up by nearly ten per cent from the year before. The value added of the metal industry grew by just short of 13 per cent and the growth was fairly evenly distributed across all quarters. Especially the output of metal processing grew strongly in the latter half of the year. Strong growth was recorded throughout the year in the manufacture of ships, and electrical and electronic products. Due to the industrial dispute of 2005, the value added in the wood and paper industry was as much as 15 per cent up on the previous year. In other manufacturing value added grew by just short of six per cent.

Building construction increased by just under five per cent with most of the growth recorded in the first half of the year. Civil engineering increased by 4.5 per cent.

In service industries value added went up by just short of four per cent last year. Trade grew by 6.5 per cent. The value added in wholesale trade grew by 6.5 per cent while that in retail trade rose by just under six per cent. Motor vehicle sales continued lively and showed growth of good eight per cent from the previous year. Hotel and restaurant activities increased by 4.5 per cent. In transport industries value added went up by 3.5 per cent. Financial intermediation and insurance activities increased by five per cent. Real estate, research and other business activities also grew by good five per cent from the year before.

In the first quarter of the year, output was 1.9 per cent greater than in the previous quarter. In the second quarter, gross domestic product was up by 1.6 per cent. In the third quarter, gross domestic product grew by 0.8 per cent, and in the last quarter by 0.9 per cent from the previous quarter.

Growth in demand driven by exports

All demand items of the national economy grew last year. The fastest growth, good ten per cent from the previous year, was recorded in exports. Imports went up by around five per cent, which puts the growth in the volume of net exports at over 40 per cent. Investments, which began to show growth in 2004, continued to increase. Consumption expenditure increased by 2.3 per cent.

Private final consumption expenditure went up by three per cent last year. Fewer cars, but clearly more domestic appliances and entertainment electronics, furniture and other furnishings were bought than in the year before. Consumption of durable and semi-durable goods increased by around six per cent and that of non-durable goods by good two per cent. Consumption of services went up by two per cent from the previous year.

The volume of government consumption expenditure grew by around one per cent. Growth was mainly recorded in local government. Public investments went up by just short of two per cent.

In the whole economy, investments increased by five or so per cent. The total volume of investments in machinery, equipment and transport equipment grew by six per cent. Construction investments went up by five per cent. Investments in housing construction increased by under six per cent and those in other building construction by four per cent from the year before.

Rate of unemployment fell, hours worked increased

According to Statistics Finland's Labour Force Survey, the rate of unemployment was 7.7 per cent, having been 8.4 per cent in the previous year. The average number of unemployed persons was 204,500. The rate of employment was 68.9 per cent, as against 68 per cent in the year before. According to the Labour Force Survey, the number of employed persons went up by 1.4 per cent and that of hours worked by 1.6 per cent last year.

Moderate rise in prices continued, terms of trade weakened again

The economy's overall price level is estimated to have risen by 1.3 per cent last year as measured by the GDP price index. The GDP price index was put up especially by risen prices of electricity, gas and water supply.

The year-on-year rise in the consumer price index was 1.6 per cent and the price index of households' consumption expenditure was 1.8 per cent up on the year before. In national accounts, the prices of housing services are measured with changes in market rents, whereas the consumer price index also takes into consideration all expenditure of owner-occupied housing. The methods used in national accounts and in the consumer price index for measuring development in the prices of financial intermediation and insurance services also deviate from each other.

The terms of trade weakened further as export prices rose by only good two per cent and import prices by six per cent.

Gross national income grew in real terms

Net national income grew by over seven per cent in nominal terms last year, and was EUR 27,300 per capita. Gross national income was EUR 169 billion last year, i.e. slightly higher than gross domestic product. Gross national income grew by 4.1 per cent in real terms, i.e. by slightly less than gross domestic product due to the weakened terms of trade.

Households' wages and salaries went up by 4.4 per cent and employers' social insurance contributions by just under five per cent. Altogether, compensation of employees contracted to 56.4 per cent of the national income. The respective share in the previous year was 57.9 per cent. The share of property and entrepreneurial income of the national income was 29.2 per cent, as against 27.4 per cent in the year before.

Non-financial corporations' profits grew clearly

Non-financial corporations' operating surplus grew by 17 per cent and their entrepreneurial income by 18 per cent from the previous year. Entrepreneurial income roughly corresponds with profit before payment of taxes and dividends. In nominal terms, non-financial corporations' profits were higher than ever before.

Non-financial corporations paid seven per cent more direct taxes and two per cent more dividends than in the year before.

Non-financial corporations' fixed investments in Finland grew by nine per cent last year and in nominal terms totalled more than ever before. Non-financial corporations' net lending, or financial position, showed a surplus of EUR 8.5 billion.

The net interest income of financial corporations (financial intermediation services indirectly measured) grew slightly from the previous year. The stock of credits and deposits grew and the interest margin broadened at the same time as the level of interest rates turned upwards. The financial position of insurance and financial corporations showed as surplus of good EUR one billion.

General government surplus over EUR six billion

The financial position of central government showed a surplus of EUR 1.6 billion last year. The surplus was the largest since 2002. State revenues from taxes went up by 3.6 per cent. Revenues from indirect taxes grew by five per cent and those from direct taxes by good one per cent. Income transfers to local government (incl. repayments of value added tax) went up by 9.5 per cent but those to social security funds fell by one per cent. Final consumption expenditure went up by only half-a-per cent in nominal terms.

The financial position of local government showed a deficit of EUR 0.5 billion, as against EUR 1 billion in the previous year. Tax revenues received by municipalities went up by 6.8 per cent and income transfers from central government by 9.5 per cent. Final consumption expenditure grew by 4.6 per cent in nominal terms.

The financial position of employment pension funds was now just short of EUR five billion and that of other social security funds EUR 0.3 billion in surplus, having shown a deficit for several years.

The total financial position, or net lending, of general government showed a surplus of EUR 6.3 billion, or 3.8 per cent of gross domestic product. The EMU surplus deviates slightly from the general government net lending of national accounts, and was 3.9 per cent, or the highest since 2002. The EMU debt amounted to 39.1 per cent of gross domestic product, having been 41.4 per cent in the year before. The reduction in the share of the EMU debt was explained by the grown GDP, for in terms of euros the EMU debt was slightly up on the previous year.

The proportion of public expenditure of gross domestic product fell to 48.6 per cent. The tax rate, or the proportion of taxes and social security contributions of gross domestic product, fell slightly last year and was 43.5 per cent. The respective share in the previous year was 44.0 per cent.

Households' real income grew by 1.6 per cent

The disposable income of households increased in nominal terms by 3.5 per cent and in real terms by 1.6 per cent last year. The wage sum grew by 4.4 per cent as a consequence of risen level of earnings and improved employment. Entrepreneurial income went up by two per cent. Entrepreneurial income from agriculture fell but that from forestry rose, because the price of timber increased. Imputed income from owner-occupied dwellings diminished as interest expenditure grew.

Social security benefits received by households went up by 2.5 per cent. Direct taxes paid by households went up by 3.4 per cent and compulsory social security contributions by good 13 per cent.

In nominal terms, the final consumption expenditure of households grew by five per cent. The savings rate, that is, the proportion of savings relative to disposable income, was -1.5 per cent, having been zero in the year before. In other words, their regular income could not quite cover their consumption expenditure. Households' fixed investments went up by nine per cent in consequence of the increased housing construction. The financial position of households showed a deficit of EUR 5.4 billion.

Households' indebtedness increased again, so that at the end of September it stood at 94.4 per cent, which was higher than ever before. The indebtedness rate expresses the ratio between the credit stock and annual disposable income.

Next revision on 12 July 2007

National accounts data for 2006 will next be revised on 12 July 2007. Preliminary data for the first quarter of 2007 will be published on 8 June 2007.

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Last updated 1.3.2007