NL Update - Dutch manufacturing industry seems to recover faster than in adjacent countries

Manufacturers are getting more and more optimistic. Around half of respondents expect further growth in the coming twelve months. Currently only 6 percent are pessimistic. The last time that respondents were this optimistic, was just before the Russian invasion in Ukraine in February 2022.

Notably, the manufacturing industry seems to be recovering faster in the Netherlands than in adjacent countries. The S&P Global flash PMIs, published last week, showed that industrial output in the eurozone as a whole is still dropping. Especially in Germany, the most important export market for Dutch industrial products, business activity in the manufacturing sector continues to wane. A possible explanation for this difference is the importance of demand from the semiconductor industry for the Dutch manufacturing sector. The semiconductor industry seems to recover earlier and faster than some other industries, such as car manufacturing, which is of less importance for Dutch growth.

In April, new data published by Statistics Netherlands showed that of all sectors, manufacturing is the least optimistic about investment. On balance, only 0.5% of respondents from the Dutch manufacturing sector expect to invest more this year than last year. Recovery of the economy and a further drop of interest rates could make financing investment easier. ABN AMRO expects that economic growth will slowly increase from this quarter onwards, and that the ten-year interest rate will drop further from 2.9 percent currently to 2.1 percent at the end of the year.