A river under the bridge in the Netherlands

Netherlands PMI May 2019

Netherlands: Operating conditions in manufacturing sector improve at a slightly quicker pace in May

The NEVI and IHS Markit’s manufacturing Purchasing Managers’ Index (PMI) ticked up from 52.0 in April to 52.2 in May. While this indicates that operating conditions improved at a slightly quicker pace in May, overall manufacturing conditions remained somewhat subdued: May’s reading was below the long-run trend of 52.7 for the third month running. Nonetheless the headline figure was still above the neutral 50-point mark that separates expansion from contraction.

The latest uptick was driven by slightly stronger growth in new orders, but remained below output levels as manufacturers cleared backlogs at an accelerated pace; backlog levels dropped at the quickest pace in more than four years. This fed into a rise in stocks of finished goods, which could suggest over production in the sector and weigh on output growth in the months ahead. The improvement in the headline figure was weighed on by softer payroll increases and weakening purchasing activity. Softer output, new orders and exports growth were the main culprits behind the easing purchasing activity and job growth.

On the other hand, subdued activity in the sector drove down input price inflation, which eased to an over two-year low and subsequently led the weakest rise in output prices in more than two-and-a-half years. Looking ahead, sentiment among producers eased as concerns over ebbing eurozone and global growth ate into output expectations. In fact, the future output index dropped to an over five-year low.

Trevor Balchin, director at IHS Markit, noted that “the marginal uptick in the headline PMI in May does not hide the fact that the Dutch manufacturing sector has slowed notably in 2019 so far (…). The current level of the output index is broadly consistent with no annual growth of official manufacturing production.”

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