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Economy in Brief

Dutch IP Continues to Push Higher
by Robert Brusca  September 13, 2021

Dutch industrial production gained 1.2% in July, rising for the third month in a row. Manufacturing output gained 1.4% on the month and has risen for five months in a row. Year-on-year growth in manufacturing IP has been logging double-digit gains since April. The Dutch economy is having a good strong run with its industrial sector and with manufacturing leading the way.

Part of this is good luck/good policy on the virus spread. There have been four distinct waves of infection that have coursed through the Dutch economy with the most recent one peaking sharply but briefly in mid-July. The spike flared from end-June and returned to a modest level of infections by early-August. The peak was the second highest of its four waves, but it came on fast and dissipated almost as quickly. On the face of it, the covid infections do not seem so benign in July, the month whose industrial data that we are analyzing. But the real win against the virus was the lack of any sort of wave of elevation at all in the death curve. It turned lower and became even lower during this period. On September 11, the Netherlands reported 11 deaths nationwide after logging six deaths the day before. Thus, for the Dutch economy, there have been infections but few deaths allowing the economy to get on with its business.

Trending higher
Dutch IP overall as well as manufacturing IP are trending higher with sequential growth rates showing progressively stronger growth over shorter and more recent periods. Headline IP (excluding construction) shows its annualized growth rises from 9.1% over 12 months to 10.5% over six months to a 17% pace over three months. For manufacturing, that same progression starts at 13.4% over 12 months to 14.5% over six months then blasts out a 24.7% annualized growth rate over three months.

However, utilities output is contracting strongly on all horizons. And mining & quarrying activity declines at a sharp pace over three months. In manufacturing, food & beverages show acceleration. Textiles do not accelerate over three months, but they do carry very strong growth rates over three months and six months. Transportation equipment output in the Netherlands is off sharply and falling at progressively higher negative rates of growth as the chip shortage continues to take its toll.

Manufacturing sector PMI data for the Dutch economy exhibit this strength as well. The PMI itself saw sequentially higher monthly readings for seven months in a row, but then it slipped lower in June and again in July. However. the manufacturing PMI also improved sequentially over 12 months, six months, and three months.

Looking at the growth in output since just before the virus struck from January 2020 onward, we find output has risen by 3.9% for a 0.2% annualized rate for that full period. But the more recent sequential growth rates inform us that it has not been a period overall of languid growth. Growth is definitely picking up and coming on stream strongly. But for the full period, growth is barely averaging expansion. In fact, the whole notion of expansion is on the back of manufacturing where output rose 7.6% (or at a 0.4% annualized rate) compared to January 2020. In manufacturing, industrial textiles also saw output expanding since January 2020, rising by 3.6% overall.

On a more topical basis, quarter-to-date growth in July is for the first month in Q3 and it gauges annualized growth from the actual Q2 base. Overall IP is up strongly on that measure by 14.4% annualized; manufacturing is up at a very robust 23.7% annualized pace. The industries footwear and textiles are up solidly to strongly in the quarter while transport equipment is off at a compellingly weak -44.1% annualized rate; this again is the chip shortage at work.

The final column ranks growth rates (or manufacturing PMI levels) back to January 2017. For overall growth, the standing is at its 94.4 percentile; that contrasts sharply with a 0% standing for utilities. The mining & quarrying sector has a 98.1 percentile standing with manufacturing at its 92.6 percentile. Food & beverage output growth stands near mid-range with a 48.1 percentile standing. Transportation equipment output growth is down to a 20.4 percentile standing while textiles do much better at an 85.2 percentile standing.

Dutch manufacturing looks quite solid, and the Dutch health officials have either done a truly great job or have been blessed with good fortune. Together we see the industrial sector as performing well and building on past gains. The Dutch industrial sector seems very solid in July. The virus doesn't seem to be an issue there (knock on wood).

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