Dutch manufacturing industry suffers contraction for the first time in two years

The Dutch manufacturing sector showed overall contraction in September for the first time in two years, said Nevi, the Dutch Association for Purchasing Managers. The organization measures industrial activity every month, and found that manufacturing and production companies received far fewer new orders in September.

The high energy and material prices are a thorn in the side of the Dutch industrial companies’ customers, said ABN Amro sector analyst Albert Jan Swart. In addition, the economic outlook is poor and the ongoing war in Ukraine is causing uncertainty among entrepreneurs.

The benchmark by which the Nevi measures activity in the sector fell 3.6 points to 49 in September. Any number below 50 points signals a contraction, while a total above that benchmark suggests growth. In the 22 years that Nevi has monitored this data, there were only three cases where the monthly index fell faster than it did last month.

Swart said the low number of orders for the industry is reminiscent of other crisis periods. Order numbers were roughly as low as when the tech bubble burst in 2001, during the credit crisis, and again at the start of the coronavirus pandemic.

The economist pointed out that production companies also still have large surplus stock that they built up during the coronavirus crisis. With a possible recession on the way, they are now trying to reduce that stock

The new measurement also included bright spots. Thus, the number of jobs in the industrial sector is continuing to grow. In addition, Dutch companies produced more investment goods, such as machinery.

This may be due to the fact that entrepreneurs want to quickly replace outdated machines with more efficient equipment in order to save on energy costs.