Netherlands: PMI continues to moderate in June despite robust demand
July 2, 2018
Momentum in the Dutch manufacturing sector continued to ebb in June on the back of softer jobs growth. The NEVI manufacturing Purchasing Managers’ Index (PMI), co-produced with IHS Markit, dropped to a nine-month low of 60.1, down slightly from May’s 60.3. However, the PMI remained firmly entrenched above the crucial 50-point mark separating expansion from contraction in business activity in the manufacturing sector. It has remained in expansionary territory for nearly five years, since July 2013.
June’s result reflected a softening in the pace of jobs growth, which weakened for the fourth month in a row. However, payrolls continued to grow robustly. The headline reading was supported by strong output growth due to a pick-up in new orders growth. New orders expanded for the 28th consecutive month, while foreign demand also remained buoyant, with resilient new exports growth. As a result, production continued to expand at a steady pace, particularly due to robust growth in investment goods. Moreover, output has increased continuously for over five years, setting a survey record. With strong demand levels and softening jobs growth, backlogs of work increased for the eleventh straight month.
Inflationary pressures remained elevated, as input prices rose sharply due to higher prices for metals, plastics and paper. This was, however, only partly passed on to consumers, with output prices softening. Pressure on manufacturing profit margins are likely being squeezed as a result. Looking towards the year ahead, output expectations remained robust, despite weakening to an over one-and-a-half-year low.
Trevor Balchin, Director at IHS Markit, commented that despite the apparent cooling of momentum, the “Dutch manufacturing growth has […] been more resilient than the recent trends seen in other eurozone nations, notably Germany.”
Author: Jan Lammersen, Economist