In April, too, production volumes grew sharply, resulting in a record 5-year period of growth. However, growth did fall to its lowest level in nine months. A similar trend was seen in the other components of the NEVI PMI, which fell from 61.5 in March to 60.7 in April. Still very high, but also the lowest level in six months. Is the end of growth now near?
So there still appears to be robust growth due to strong order flows from both home and abroad. Growth in new orders was significant, but smaller than the previous month and the smallest in a year. Export orders grew at the smallest rate in a year and a half. Employment growth was again lower than in January and February, but remained higher than all months prior to December 2017. But growth is slowing down. Not surprising: the Dutch manufacturing sector has been experiencing an improvement in business conditions for 5 years in a row now, which is unprecedented!
All good things come to an end, of course. Production backlogs are mounting rapidly, getting materials in on time is becoming increasingly difficult (the extension of delivery times was the second largest ever) and so is finding good and sufficient staff. Purchase price inflation is high. Sales prices showed the fourth largest increase since June 2011. Calls for wage improvements are getting louder. Expectations for future production volumes were again extremely positive, although this optimism was the lowest in eight months. All this will put the brakes on growth and it is happening now. But in the short term, there is still little to fear. The full order books give a good outlook for this year.|
The situation around us is not much different
The Netherlands is doing well against other European countries, as the Eurozone-wide PMI was 56 last month, and that in the Netherlands above 61. In particular, the Netherlands leads in the high-tech sector, which boosts the country's PMI. Our main trading partner, Germany, has a PMI of 58.1. China's PMI scored significantly lower. It came out at 51.4.
ABN Amro stated in their Macro Weekly last week that they leave their view on the outlook in Europe unchanged. The decline in business confidence in Europe has levelled off, except for Germany. ABN sees this decline as a temporary slump and maintains the scenario that the eurozone economy will continue to show above-trend growth in 2018.
Buyers in manufacturing have two priorities right now:
- Getting ordered products in on time and
- curb purchasing price increases as much as possible.
Biggest challenge for entrepreneurs is keeping the current growth under control and making sure you don't lose customers because you can't meet delivery commitments. A great task for buyers to create maximum value for their business. Did you 'squeeze out suppliers on costs' in times of crisis? If so, you will now notice it significantly in purchasing prices. Buyers who have invested in their supplier management are now reaping the benefits.
Erik van Assen, NEVI community manager (with thanks to Professor Prof Arjan van Weele).
