Dutch manufacturing industry has its hands full catching up with backlogs and keeping delivery times to customers within limits. Cause: shortages of materials and raw materials which prevent orders being delivered. And staff shortages. This can be inferred from the latest NEVI PMI report. The NEVI Purchasing Managers Index for Dutch manufacturing came in at 60.4, just 0.3 points away from the record in February 2011.
There is still, for 52 months in a row now, substantial turnover growth. Both domestic and foreign sales increased sharply (by 59.3 and 59.0 respectively. Especially in the equipment construction and investment goods sector, in which the Netherlands is strong. This leads to higher production volumes, which means companies need more people. And here a record did fall: the employment index reached the unprecedented value of 59.4! Companies have a huge need for good skilled workers. And this is not only true in industry. A similar trend is seen in construction and installation engineering. What a difference from a few years ago. Given the pipeline of orders available to companies, the demand for qualified personnel will continue for some time to come.
And how are we doing compared to abroad? The Eurozone ended October with a PMI of 55.9. And Germany and France reported 56.9 and 57.5 respectively. Are there no bugs in the air? Yes there are! Purchasing price inflation is significant (70.6). This will further drive overall inflation. Even without a European debt buying programme, ECB President Mario Draghi will be at his beck and call in the foreseeable future.
Future is hard to predict
Will strong economic growth continue in 2018? Economists say the global economy is picking up further in 2018. Economic forecasts are by definition uncertain. More uncertain in some periods than others. But can we also see times with greater uncertainty ahead of time? The level of uncertainty varies over time, and was high at the time of the great recession and more recently in 2014. At the time of the great recession, the question was how deep and how long the contraction would last. Now we have economic growth again but that does not take away from other uncertainties in 2018. Already we are seeing shortages of materials and raw materials. This will only get stronger with continued economic growth. Which further increases delivery times!ABN Amro also indicates upside potential for raw materials in 2018. Buyers are going to face strong price increases for various steels, copper, zirconium, nickel, chrome lithium, titanium and aluminium in 2018. Although the impact of price rises and price volatility depends heavily on business operations (such as the share of material costs in total cost and any ability to pass on price fluctuations to customers), such shifts -certainly in the absence of a level-playing-field- could lead to declining competitiveness of the Dutch economy.
Circular economy the solution?
So is the circular economy the holy grail for shortages of and therefore price increases for raw materials? Circular business is all about smarter reuse of raw materials, no waste in your production process and future-oriented procurement. On 2 November, the new book 'Route circular', commissioned by VNO-NCW (Management Studies Foundation) and containing numerous practical tips based on experiences at some 31 companies, was presented. The motto is "Make the circular economy important before it becomes really urgent". In my opinion, it is already urgent, look around you! As NEVI, we already started exploring the possibilities of Circular Economy three years ago through the Green Deal Circular Procurement. I believe there should be precisely (even) more political and entrepreneurial attention and action on the critical materials for our Dutch Economy. How can we ensure that we maintain access to these materials (secure supply; e.g. lithium for the electric cars needed in 2030) or become self-sufficient? As the Netherlands, we must fully commit to research and development into alternative materials, efficient use of materials and intensification of recycling. Hopefully, the new cabinet will also find this important and entrepreneurs will see the urgency.
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This blog was written by Erik van Assen. View his profile here.
(Courtesy of Professor Prof Dr Arjan van Weele).
