Netherlands: PMI moderates again in May but business conditions remain strong
June 1, 2018
The NEVI manufacturing Purchasing Managers’ Index (PMI), co-produced with IHS Markit, decreased from 60.7 in April to 60.3 in May, the lowest reading since September of last year. However, the PMI remained handsomely above the crucial 50-point mark that separates expansion from contraction in the Dutch manufacturing sector. It has remained in expansionary territory since July 2013. Although the average reading so far in Q2 is lower than in Q1, this likely marks a leveling off from high levels rather than a marked slowdown of activity in the Dutch economy, and our panel still has an upbeat view on the outlook on the economy.
May’s print reflected robust growth in new orders and output, which was offset by weaker job creation and reduced pressure on supply chains. New orders increased for the 27th consecutive month on the back of domestic and foreign demand, with new export orders also picking up. Subsequently, manufacturing production increased; output has now increased continuously for over five years. The investment goods sub-sector recorded the strongest growth rate. Although payrolls increased as manufacturers continued to take on staff to cope with robust demand levels, the pace of job creation eased slightly. Backlogs of works increased as a result, and pressure on supply chains eased somewhat.
In terms of prices, inflationary pressures remained elevated despite a moderation in input price inflation. This was passed on to consumers, with output price inflation remaining strong despite moderating. In terms of output expectations, manufacturers continued to remain upbeat about future output levels. Trevor Balchin, Director at IHS Markit, commented: “Dutch manufacturers are […] still outperforming their counterparts in Germany, France and the rest of the eurozone (on average).”
Author: Jan Lammersen, Economist