Dutch industrial production fell by more than 9% in May compared to a year earlier. Everywhere the sector is also under pressure, but a 9% decline is not seen anywhere else. And that’s a major setback, says BNR in-house economist Han de Jong.
Even if it’s ‘hard to say it’s not bad’ with such a drop, according to De Jong we can speak of an improvement. There was still a 12% drop in April. “You also see that production is slightly up from April,” he explains. «This is positive, although I must add that the figures fluctuate enormously from month to month. So we have to be careful with the interpretation.’
“You have to be careful with the interpretation”
According to De Jong, it is entirely possible that the nadir of industrial production has passed and that there is light at the end of the tunnel. Even if he thinks it’s mostly a matter of waiting. “But it could be… it’s the straw we can hold on to.”
Near and next
According to De Jong, there is another drop in the relationship between Dutch industrial production and that of neighboring countries such as Germany. Where the Netherlands normally keeps pace with Germany, this has not been the case in recent years. And De Jong finds it an interesting fact. “Last year, production increased significantly in the first part of the year, while German production actually decreased,” he continues. “We did much better last year, and this year it’s actually the other way around.”
And according to De Jong, that has “everything to do” with the makeup of the industry. For example, the automotive industry in Germany plays a huge role, while it is much smaller in the Netherlands. “Perhaps it is not surprising that German industry manifests itself a little better than ours,” he says. “But what you see in both countries is that energy-intensive sectors are struggling.”
Hopeful numbers
In the United States, things seem to be clearing up. Business confidence in the services sector has increased, unemployment fell in June and the housing market appears to be stabilising. And this seems to be good news for the US fight against inflation, even if appearances can be deceiving, according to De Jong. “The biggest problem in the US is inflation, caused by demand for goods and services outstripping supply.”
According to De Jong, inflation can only be overcome by cooling the economy with interest rate hikes, but the problem is that nobody knows exactly how high interest rates would have to be to cool the economy enough to control inflation. “And if the US economy is now recovering, then that suggests interest rates aren’t high enough,” De Jong concludes. “And then I’d argue that the positive numbers actually increase the likelihood that the Federal Reserve will have to hike rates further — and that’s bad news for stock markets, which are interest rate sensitive.”
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.
