Netherlands: Manufacturing operating conditions improve at the strongest clip in over two years in January
February 1, 2021
Manufacturing conditions in the Netherlands improved at a sharp pace at the start of the new year, with the NEVI Manufacturing Purchasing Managers’ Index (PMI) rising to 58.8 in January from 58.2 in December. January’s print marked the best result since September 2018. Moreover, the index moved further north of the neutral 50-threshold that separates an overall increase from decrease compared to the prior month.
The jump in January came on the back of the fastest output growth since September 2018 and another rise in new orders, with strong growth in foreign demand. As a consequence, staff levels at firms rose for the third month running. That said, capacity pressures remained elevated and backlogs of work increased for the second consecutive month. Greater production requirements also drove an upturn in buying activity. That said, greater demand for inputs and restrictive measures to curtail the spread of Covid-19 placed further strain on supply chains, with lead times lengthening markedly. Turning to prices, higher input prices were passed on to customers as output prices also rose. Lastly, confidence regarding output in the year ahead rose to the strongest in over two years on hopes of looser restrictions and improved demand.
Commenting on the result, Albert Jan Swart, manufacturing sector economist at ABN AMRO, noted:
"Longer delivery times might lead to shortages of certain parts, which might become a bottleneck during the following months. Additionally, businesses should make sure they have sufficient working capital to support larger inventories. The past year has put financial stress on many firms' balance sheets. Some firms might need additional capital to deal with the sudden output growth.”