Dutch manufacturing sector reports highest inflation since 2022

The Nevi Purchasing Managers' Index that was published on Monday 2 March did not yet include the effect of the war as it had only started two days earlier. The new Nevi survey of approximately 350 purchasing managers took place from 12 to 23 March. It is already clear that Dutch industry is struggling with the highest inflation since the end of 2022. The prices of metals, plastics, energy, fuel and transport are rising rapidly, and many companies are passing these costs on in their sales prices.

Severe disruption of supply chains

The disruption of supply chains is also visible in delivery times, which in March increased at the fastest pace since the summer of 2022. Supply chains were then disrupted by Russian shelling of the steel industry in Ukraine and a sharp contraction of energy-intensive industry across Europe, which produce basic chemicals, plastics and other semi-finished goods. Currently, buyers mainly report delays in goods from Asia. This is probably caused by disruption of container shipping, but the shutdown of energy-intensive factories due to a shortage of oil may also play a role. Prices of plastics have been rising rapidly since the beginning of the war, partly due to the halt in exports of plastics from countries in the Middle East, which normally export significant amounts. A shortage of Middle Eastern naphtha has brought petrochemical plants in Asia to a standstill, exacerbating the shortage of plastics such as polyethylene.

Some Dutch companies are benefiting from the disruption of supply chains. Purchasing managers from other countries are now knocking on the door of Dutch suppliers in order to buy the necessary products. Nevi respondents report higher orders from Thailand, Singapore, China and Australia, among others.

Further growth in activity

Optimism about growth in 2026 has faltered since the war. Nevertheless, the Nevi Dutch Manufacturing PMI continued to rise in March, from 50.8 to 52.0. Production growth picked up and new orders rose again, after a slight decline in February. German demand is also likely to rise. Germany is the most important export market for the Dutch manufacturing industry. After four years of malaise due to the war in Ukraine, German manufacturing output is growing again, thanks in part to the growing defence industry.

Despite the growth in production and the rise in the Nevi PMI, the outlook for the Dutch manufacturing industry remains uncertain. Much will depend on the duration of the disruption of the oil and gas market. Even in the event of a quick ceasefire, it is not certain that oil and gas production will return to normal in the short term, due to damage to energy infrastructure such as oil terminals, LNG terminals and pipelines. For the time being, ABN AMRO expects the serious disruptions to the energy supply to continue until the end of May. In that case, the impact on economic growth can be limited. In a negative scenario, the economy will be hit harder and there will be a greater impact on investment, which could hamper the machinery industry, one of the most important industries for the Netherlands.