Dutch Manufacturing Sector Signals Further Deterioration
Operating conditions in the Dutch manufacturing sector continued to worsen at a modest rate in July.
Output, new orders and employment all fell since June, while there was a further sharp reduction in inventories.
On the price front, output charges were cut for the first time since last November as input costs fell to
the sharpest degree in over three years.
The headline NEVI Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of the performance of the manufacturing economy – was unmoved at a reading of 48.9 in July. The PMI has now posted below the 50.0 no-change mark for five successive months.
Latest data showed that manufacturing output fell for a fourth successive month in July, with the modest
reduction in production linked in part to ongoing weakness in underlying demand. July’s survey indicated that new order volumes fell for a fifth successive month, albeit at the slowest rate in that sequence.
Competition was reported to be fierce, with this exacerbated by reports of weaker demand and ongoing caution amongst panellists.
Weakness in total new orders emanated in the main from the domestic market as new export order volumes rose in July for the first time since April. There were reports that foreign clients were busier, leading to a general improvement in demand from abroad for Dutch manufacturing goods.
Evidence of excess capacity was again provided by the latest survey, with backlogs of work and employment both continuing to decline during the latest survey period.
Outstanding business was lowered for a sixteenth successive month, albeit at the slowest rate since June 2011. Lower volumes of work outstanding reflected a fall in order books, and this also led to a reduction in staffing levels over the month. Job shedding has now been registered for four successive months, with the rate of contraction the sharpest in this period.
July’s survey indicated a sharp reduction in manufacturing input costs, with companies signalling that oil-related products had fallen in price. There were also reports of a reduction in the cost of steel.
The overall fall in input prices was the sharpest registered since June 2009 and this afforded manufacturers the opportunity to cut their own prices charged in July. Latest data showed the first reduction in output prices since last November amid evidence of ongoing competitive pressures.
With production and orders both falling, companies chose to lower their purchasing activity in July. The
rate of contraction was the sharpest of the year so far as companies sought to utilise stocks wherever possible. Inventories of raw materials and semimanufactured goods were lowered at the quickest pace since December 2011.
Paul Smith, Senior Economist at Markit commented: “Operating conditions worsened slightly during the latest survey period, as the uncertainty surrounding the European debt crisis continued to weigh on demand, purchasing and employment decisions.
“Companies benefited from a marked easing of input price pressures, as weakness in oil prices earlier in the year filtered through into derivative products. However, a portion of these lower costs were passed on to clients as manufacturers reacted to fierce market demand.”