Growth in Dutch manufacturing industry picks up

The overall score of the Nevi Netherlands Manufacturing PMI is further depressed by the still shortening delivery times, which indicate excess inventories and weak demand. However, it seems that the destocking process is now really close to completion. The indicator for the quantity of purchases came in at exactly 50.0, which indicates that, on balance, purchasing managers are not buying less than in the previous month. Given the rapid growth of production, it is quite likely that more material will soon have to be purchased, which would further stimulate the recovery of demand for semi-finished products.

Industrial production is currently increasing from a low level, as production fell in 2023 and also in the first quarter of 2024. However, the Dutch manufacturing sector seems to have bottomed out. Internationally, the manufacturing industry is still struggling. Dutch industry is probably benefitting from the recovery of the semiconductor industry.

Inflation is rising again

One downside of the rapid recovery is the return of inflation. Since the first half of 2023, both input and output prices were on a downward trend. Since then, the decline in prices of industrial goods has mostly contributed to the decline in overall inflation. However, that trend seems to be reversing. Input prices in particular rose sharply in May, and output prices also rose more rapidly. This may have to do with the increase in the prices of, for example, natural gas and copper. Wage costs are also rising rapidly due to the combination of high inflation in recent years and the tightness in the labour market. Due to, among other things, the new collective labour agreement for the ‘Metalektro’ sector, which came into effect on June 1, the increase will continue for a while.