Dutch Manufacturing Sector Returns to Expansion in September
Dutch manufacturing sector operating conditions improved slightly in September. Output was bolstered by a marginal increase in incoming new orders, while employment rose modestly. However, input prices increased at a marked pace, putting pressure on operating margins as output charges declined further.
The headline NEVI Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of the performance of the manufacturing economy – registered 50.7, up from 49.7 in August.
Jack Kennedy, Senior Economist at Markit commented: “A rise in the headline PMI above the key 50.0
threshold in September is positive news, although the pace of expansion was only marginal. Activity levels were buoyed by a further solid expansion of new export orders, which offset lacklustre domestic demand. However, there were signs of pressure on manufacturers’ operating margins returning as input prices rose markedly but output prices continued to decline amid strong competitive pressures.”
The latest reading was the first time since February in which the index has been above 50.0 and was indicative of a marginal improvement in the health of the manufacturing sector. Supporting the PMI were slight increases in both production and new orders during September.
Data suggested that stronger demand from foreign clients remained the principal factor underpinning sales, as export orders increased at a considerably faster pace than total new work.
There was evidence that spare operating capacity persisted in September, as backlogs of work decreased for an eighteenth consecutive month. Helping companies make inroads into their outstanding business was an expansion of employment at their units.
Staffing levels increased for the first time in six months, albeit modestly. September data pointed to a further reduction in purchasing activity by Dutch manufacturers. The latest fall in input buying was the fifteenth in consecutive months.
Correspondingly, stocks of purchases continued to decline, with a number of panellists commenting on efforts to free-up working capital. Supplier performance continued to worsen in September, with average delivery times lengthening at the sharpest rate since February.
Anecdotal evidence suggested that delays in the receipt of purchased items were frequently the result of low
stock levels at vendors’ units. Input prices in the Dutch manufacturing sector increased for the first time in four months during September.
The rate of cost inflation was marked, albeit slower than the survey’s long-run average. There were a number of reports linking higher purchasing costs to unfavourable exchange rates.
In contrast, prices charged by Dutch manufacturers for their finished goods continued to decline in September. Competitive pressures were commonly cited as a factor weighing on firms’ pricing power.
Finally, stocks of finished goods held by Dutch manufacturers fell for the sixth month running in September. A number of survey respondents linked this to cost-cutting efforts.