Netherlands: Operating conditions improve at a stable pace in July
August 1, 2019
Dutch operating conditions continued expanding at a soft pace in July, as the NEVI and IHS Markit manufacturing Purchasing Managers’ Index (PMI) was stable at June’s 50.7; this, however, marked a 74-month low. Subsequently, the index came in below the long-run average of 52.7 but remained above the neutral 50-point mark separating expansion from contraction in the manufacturing sector. The sector remained in expansionary territory for the 73rd consecutive month in July.
The stable headline figure was driven by a drop in new businesses being offset by a marginal rise in output and an uptick in employment in anticipation of increased production in the months to follow. New orders dropped on both reduced foreign and domestic demand; new export orders fell for the first time since June 2016 amid anecdotal evidence of demand weakness from Germany, the United States and the United Kingdom that was likely linked to protracted trade tensions and Brexit uncertainty. Moreover, reduced new orders drove a fall in backlogs of work, albeit it the slowest pace since March. Meanwhile, in anticipation of greater output, manufacturers scaled up their purchasing activity and post-production inventories rose at the second-quickest pace in the survey’s history. In terms of prices, weakened demand dynamics, and manageable raw materials price inflation, led to the softest input price and output price inflation in nearly three years.
Commenting on the July PMI data, Amritpal Virdee, economist at IHS Markit, stated that “if these weaker demand conditions persist, Dutch manufacturers could experience a challenging time over the coming months as reduced order intakes could knock production into decline.”
Author: Jan Lammersen, Economist