Sentiment among Dutch industrial entrepreneurs is still not doing well. This has also worsened in recent months, ABN AMRO says in a new report. The purchasing managers' index fell further to 50.7 in June. A reading above 50 indicates optimism about business acitvity; a reading below 50 indicates pessimism. Dutch entrepreneurs are thus still slightly optimistic on average.
In a number of industrial sectors, entrepreneurs are pessimistic about their own production or the economic climate, especially in the transport equipment industry.
Code orange
The signals for global industrial activity are on orange. The composite global purchasing managers' index of 49.4 (June) indicates slight contraction, with industrial activity shrinking in both China and Germany. These countries are key growth engines for global manufacturing. Dutch industry, which is relatively dependent on exports, is sensitive to this. Germany in particular could drag Dutch industry down with it.
The German PMI for new export orders fell to 43.1 in July. That is the lowest level since the credit crisis. German industry is struggling with declining demand from China, for example for parts or machinery. In addition, the car industry is facing considerable problems, such as declining demand and stricter emission standards. China's industry has been faltering since December due to the trade war instigated by Trump.
Industrial production and turnover contracted
In April and May, the average daily output of the manufacturing industry shrank by an average of 1.4% compared to the same period in 2018. Basic metals, metal products and mechanical engineering are probably struggling with declining demand from abroad.
Manufacturing turnover has contracted considerably so far this year: 3.4% year-on-year. The contraction was 4.2% in the first quarter, 0% in April and 4.4% in May. This is mainly due to declining foreign sales. In December 2018, sales also contracted, by 2.6%. The turnover contraction is caused by the decline in industrial activity abroad. Domestic sales are still keeping turnover up slightly.
Labour market
Manufacturing entrepreneurs have become much less optimistic about the development of the number of vacancies. Labour demand is still high, but declined somewhat since the second quarter of 2018. In the first quarter of 2019, the number of jobs created recovered somewhat, but the number of temp hours continued to shrink, presumably due to a combination of high rates and slowing job growth.
Figures from the staffing industry suggest that manufacturing employment growth slowed further in the second quarter of 2019.
However, it is still true that almost all industrial sectors see staff shortages as the main obstacle, especially the electrical appliance industry (27.1%).
The full report can be downloaded here.
Source: ABN AMRO.
