The Dutch manufacturing industry is experiencing lower growth in 2019 and 2020. Orders from key end-markets such as Automotive and semiconductors are declining as the global economy grows at a slower pace. In addition, major uncertainties such as brexit and US trade policy still hang over the market
Volume growth in manufacturing is expected to drop from 2.5% in 2018 to 1% in 2019 and 0.5% in 2020. This is according to ING Economics Department's Industry Outlook.
Foreign turnover down
Falling demand from abroad in particular is putting a brake on growth in Dutch manufacturing. Uncertainties such as US trade policy and the upcoming brexit result in a drop in foreign orders. Sales from abroad have been shrinking since the last quarter of 2018. Although domestic sales are still growing, growth has slowed sharply.
Growth falls in technology industry
The downturn from abroad affects the technology industry, among others. In the high-tech industry (electrical appliances and mechanical engineering), the pace of growth is going down. A shrinking market for semiconductors particularly affects mechanical engineering. The Automotive industry is also struggling with less activity as car sales decline worldwide. The rubber and plastics industry is doing better, benefiting from activity in transport (tyres), construction and retail (packaging). Still, all in all, growth in production volume in the technology industry is expected to fall from 1.5% in 2018 to 1% in 2019 and 0.5% in 2020.
Make way for chemicals
Due to its position at the front of the production chain in the Netherlands, the chemical industry will be the first to face slower growth in the economy. Moreover, chemistry is directly and indirectly as much as 90% dependent on foreign countries. This makes the further course of the trade war between the United States and China (and Europe) very relevant. The brexit is also important due to the Dutch chemical industry's strong ties with the UK. Chemical production is expected to stabilise in 2019 and may show slight growth (0.5%) in 2020. Profitability is also under pressure due to the previously increased oil price. This is a crucial factor for chemical companies' raw material and energy costs.
Despite drop in confidence, entrepreneurs remain positive on balance
Both the CBS entrepreneur survey and the Purchasing Managers' Index (NEVI PMI: Purchasing Managers' Index) show a declining trend. However, the final verdict of entrepreneurs is still positive on balance. However, a slower pace of growth is inevitable as long as tensions in global trade remain present.
