Dutch industry again received fewer orders last month. This is evident from the monthly Purchasing Managers Index of the Netherlands Association for Purchasing Management (NEVI). Orders have been down for nine straight months, and last month’s contraction was the sharpest since October.
And that’s bad news according to industry economist Albert Jan Swart of ABN Amro. While the figures appeared to have plateaued earlier this year, it can be seen that activity has weakened further and demand remains sluggish.
‘Producers of semi-finished products in particular are experiencing problems’
The problem is mostly with manufacturers of semi-finished products, says Swart. “You can think of the chemical industry for that,” he says. ‘Who makes all kinds of chemicals and materials for other industries – like the rubber and plastics industry. They are also partly energy-intensive and mainly make products that other companies keep in stock.’
To chill out
And it is precisely those stocks that are falling due to rising interest rates. However, the decline in new orders and backlog continues steadily. “We see this for example in the machine industry,” continues Swart. ‘Production is still quite reasonable, but the new orders that are placed are much lower. The number of open orders companies have is quite large, but if demand remains weak for a long time, companies will further reduce production. And this will put pressure on the Dutch economy.”
Improvement
According to Swart, the fact that there has been a decline for nine months in a row could also be a harbinger of a mild recession. “At least for the eurozone, and certainly for industry,” he continues. “The services sector has been performing better lately, so it’s mostly industry that’s sensitive to interest rates.”
By this, Swart refers, among other things, to stocks, but also to capital goods such as cars. These are often financed with loans. “Construction is also facing headwinds,” he explains. “And that in turn has an effect on building material producers, so we see that industry is much more sensitive than the service sector, and is therefore more affected by interest rate hikes.”
light
It’s not all doom and gloom according to Swart. For example, at the time of the corona virus and after there was a lot of pressure on the industry, with production too low. Now delivery times are getting shorter again. The calm therefore suits the market well, he says. “There were huge shortages, which drove up the cost of many parts and materials,” he concludes. ‘Now we are seeing that input costs are coming down and car and machine makers are benefiting, so they can produce more and catch up. Positivity is due to weak demand, but it’s a blessing in disguise.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
