Growth for 2015
- ABN AMRO predicts growth for all sectors of industry this year.
- Machine manufacturing, base metals and vehicle manufacturing will be the strongest growers in 2015.
- Companies are still reluctant to take major risks or invest heavily in expansion.
Favourable outlook for 2015
Most indicators for Dutch industry are looking good for 2015, for example the high PMI (purchasing managers index) for January and the relatively high consumer confidence. Following a 2.3% decline in 2013, 2014 ended on a positive note with 1.7% growth. The strongest growers in 2014 were machine manufacturing, base metals and vehicle manufacturing. Growth was held back in 2014 by the brittleness of the economic recovery in the Netherlands and by the uncertainty surrounding developments abroad. In light of the relatively bright start to 2015 and the returning confidence among industrial enterprises, ABN AMRO predicts that output will grow in all sectors of industry in 2015.
Numerous indicators of growth
Sectors where business activity depends on domestic demand will experience less growth than sectors where the main focus is abroad. Many of the indicators are currently favourable, for example the growing employment, the diminishing numbers of bankruptcies and the relatively high purchasing managers index and consumer confidence index. Capacity utilisation is still short of the long-term average, however, and in Q1 of 2015 only showed a marginal increase to 80.4%. Evidently the present utilisation levels are sufficient to meet the demand. Companies are moreover reluctant to take excessive risks or invest heavily in expansion. This is particularly true of companies that are highly sensitive to developments abroad, which is why capacity utilisation is chiefly lower (i.e. below the long-term averages) in the sectors with a strong foreign focus. ABN AMRO also finds that the average age of the industrial workforce (currently around 43) is relatively high, and 4% above the average for the Netherlands. The average age in industry continues to rise, new hirings of younger workers are falling and the numbers enrolling for technical studies are also diminishing. Skilled technical workers remain scarce and in high demand.
Growth forecasts per sector
Output in the machine manufacturing sector is expected to show the strongest growth rate (7%), followed by base metals (5.5%) and vehicle manufacturing (4%). Machine manufacturing is receiving a boost from the high demand from abroad, in particular the United States, Germany and emerging Asia. The situation in the base metals sector and vehicle manufacturing is closely linked to the favourable developments in Germany’s automotive industry, while domestic demand for these sectors is also recovering. The chemical industry will show moderate growth (at 3%), which from a historical perspective is still minor. Output in this sector fell in 2014, largely owing to fierce international competition, particularly from Asia. As a result, the number of bankruptcies in the chemical industry showed a sharp increase in 2014: from 2 companies in 2013 to 7 in 2014. The relatively low oil prices and cheap euro will provide some relief in 2015, without immediately leading to significant improvements. ABN AMRO also expects the situation for electrical engineering and appliances industry to improve from the disappointing growth rate for 2014. The demand for exports will rise, and ABN AMRO expects a further boost from increasing consumer confidence.