Industrial production volume continues to grow due to domestic demand

Industrial activity in the Netherlands grew again in September. Stocks of finished products were further reduced and the sub-indicator for new orders rose sharply to 53.9. Unfortunately, the number of new export orders declined. Conversations with Dutch entrepreneurs revealed that this is mainly due to intensified price competition from Asia. The European market has become more important for many Chinese manufacturers due to high US import tariffs.

The growth in production does not apply to all industrial subsectors. The Port of Rotterdam foresees an exodus following BP’s announcement last week to halt the development of a new biofuel plant. Shell had earlier announced the cessation of its already initiated construction of a biofuel plant in Pernis. The regulatory burden, grid congestion, nitrogen issues and fierce foreign price competition on biofuels are cited as the main reasons for cancelling the planned investments.

In addition to the chemical and plastic recycling sectors, the prospects for the semicon and medical industry in the short term are also not positive. ASM International lowered its revenue forecast for the fourth quarter and ASML indicated that the previously indicated growth forecast for 2026 will likeby to be revised downwards due to macroeconomic and geopolitical uncertainties.

Mixed signals from Germany

Many Dutch entrepreneurs keep a close eye on developments in the German economy. After all, the German government has allocated significant funds to improve infrastructure and scale up defence production. This will ultimately create additional demand for Dutch suppliers of metal and plastic products, electrical engineering and building materials. The German statistics office Destatis surprised with the report that in July industrial production had increased by 1.3 percent, with the largest production growth in mechanical engineering (9.5 percent) and pharmaceuticals (8.4 percent). Even the automotive sector showed a slight production increase of 2.3 percent compared to June.

Unfortunately, this positive trend in July is not supported by the Flash HCOB Purchasing Managers' Index for the German manufacturing and services sector. Ahead of the final index, it touched a level of 52.4 on September 23. This is the highest level in the past sixteen months. However, it is only the services sector that is showing rapid improvement in Germany, mainly due to the initiation of new projects. Conversely, the index for Germany’s manufacturing sector deteriorated in September from 49.8 to 48.5, driven by a lack of new (export) orders.

Recovery remains uncertain

Dutch domestic investments are picking up slightly and the German production figures for July show modest growth. However, the outlook for industrial recovery remains uncertain in the short term. Trump's import tariffs limit European exports, and many manufacturers of machinery, chemical products and plastic packaging face fierce price competition from China. In time, European governments could strengthen the manufacturing sector with investments in defence and infrastructure.