Netherlands: Dutch manufacturing sector continues to lose steam in April
May 1, 2019
At the start of the second quarter, the Dutch manufacturing sector continued to lose steam: Operating conditions improved at the weakest pace since June 2016, with the manufacturing Purchasing Managers’ Index (PMI) dropping to 52.0 in April from 52.5 in March. In April, the PMI came in below the long-run trend of 52.7. Nonetheless, the index remained north of the neutral 50-point mark that separates expansion from contraction.
The latest drop in the headline figure came on the back of only a marginal rise in new orders and a strong reduction in backlogs of work. The weak increase in new orders was due to downbeat domestic demand, while export orders grew at a stronger pace than domestic orders. Export orders grew robustly despite some weakness in European markets. Output expanded at a marginal rate, in part reflecting the clearing of backlogs of work, which dropped at the quickest pace in over four years, while stocks of finished goods fell for the first time in seven months. Contrasting the loss of steam, employment growth continued robustly. In fact, headcounts increased for the 50th month running. In terms of prices, both input and output inflation picked-up somewhat but remained below last year’s levels. Looking ahead, sentiment among manufacturers reading output over the next 12 months continued to ease somewhat in April but remained resilient nonetheless.
Trevor Balchin, director at IHS Markit, noted that despite cooling down, the manufacturing PMI index still suggests overall growth. However, Balchin noted that the marginal rise in new orders and sharp drop in backlogs of work “suggest that the output and job indices will weaken unless new business growth picks up.”
Author: Jan Lammersen, Economist