Having got off to an encouraging start in the first quarter of 2014, the industrial sector experienced a relatively poor Q2. Whereas Q1 production was up 3.5 percent relative to the same period a year before, the annual growth rate in Q2 fell to 0.8 percent.
Slower industrial growth in Q2
Growth rates levelled off in almost all sectors of industry. For example, the Q2 increase in production in the chemical industry fell below the annual long-term average of 1.8 percent. ABN AMRO believes that the structural problems in this sector – such as increased international competition – are too great for the rate of growth to pick up in 2015. The situation is more encouraging in the rubber and plastics industry, though competition in this sector too is increasingly fierce. The growth of production in this sector fell during Q2, though remaining marginally above the long-term average. Production in the base metals industry has increased this year. By the end of July the annual growth rate was 7.5 percent. This sector’s growth data are solid, as are those in the mechanical engineering industry. ABN AMRO expects production in the base metals industry to increase by 5 percent for 2014 as a whole. At present, mechanical engineering is the jewel of the industrial sector, and is set to record 6 percent year-on-year growth in 2014. The annual production rate for metal goods fell by 1.6 percent in June, though so far it has increased by 3.2 percent year-on-year. Overall, companies supplying export-intensive sectors will benefit from the increasing export volumes in 2014 and 2015.
Order book improving and Germany’s economy reviving
Business confidence in the industrial sector fell at the start of the year, based on low expectations for incoming orders and concerns about the slower rate of growth in Germany. Despite expectations for new orders remaining relatively low, more businesses are assuming that they will be placing additional orders with their suppliers during the coming months. Orders in terms of months’ work also show a slight improvement. The situation in the Netherlands is closely linked to the economic developments in Germany, the country’s principal trade partner. Here too many of the indicators continued their downward trend during Q2. However, the most recent data offer more encouragement. Industrial orders have risen by 4.4 percent on an annual basis so far this year, the purchasing managers index is climbing once more and industrial production is increasing again following some disappointing months during the first half of 2014. ABN AMRO expects that the market will improve during the remainder of the year. A stronger global economy and the cheaper euro will boost growth in the industrial sector during the next few months, not only in Germany but also in the Netherlands.
Industrial production up 2.5 percent in 2014
Global trade has increased by 3 percent on an annual basis this year, following last year’s 6 percent growth. Industry depends primarily on growing export volumes, however, with Europe and Asia playing an important part, and these are precisely the regions now facing a period of economic uneasiness and uncertainty. Confidence among manufacturers remains relatively poor as a result, and since the start of the year has been fluctuating around the long-term average. Nevertheless, for the final months of the year we predict further global recovery. ABN AMRO expects that 2014 will close with the Dutch economy showing a modest recovery, and predicts a year-on-year production growth of 2.5 percent for 2014. In 2015 the year-on-year economic growth will improve to 1.5 percent, and we expect the annual growth rate for industrial production to rise by 3.0 percent.
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