Netherlands: Dutch manufacturing sector continues to lose steam in February
Momentum in the Dutch manufacturing sector continued to lose steam in February, with the manufacturing Purchasing Managers’ Index (PMI) dropping from 55.1 in January to an over-two-year low of 52.7. The index, which is produced by NEVI and IHS Markit, remained above the neutral 50-point mark that separates expansion from contraction in the sector, however.
A tougher external environment seemingly started to bite the Dutch manufacturing as new export orders growth was flat from the prior month, ending a 31-month streak of growth. This weighed on total new order growth, which moderated to a three-year low in February. Nevertheless, output continued to expand, which led to an increase in stocks of finished goods for the fifth month in a row. This was partially due to firms preparing for Brexit, and the differing dynamics between order growth and output growth suggest that if demand picks up in the months ahead, output growth is unlikely to increase substantially. Moreover, weak new orders moderated firms’ purchasing activity, leading to the slowest accumulation of input stocks in 33 months. Meanwhile, inflationary pressures eased with input prices rising at an over-two-year low pace and output prices increasing at a one-and-a-half-year soft pace.
Looking ahead, manufacturers retained an optimistic outlook on future output despite an expected moderation in economic growth. Commenting on the result, Trevor Balchin, director at IHS Markit, noted that “although the Dutch PMI remained above the eurozone aggregate […] the differential between the two indices has narrowed recently from an all-time high back in September.”