Economy in Brief

The rebound that wasn’t Industrial production rebounded without vigor in February, gaining 0.4% after falling by 0.8% in January. Moreover, the trends are poor and show no sign of stabilization. 12-month to 6-month to 3-month overall output is sinking faster than is manufacturing output. And all the major manufacturing sectors show either clear signs or strong hints of progressively faster declines in output.

Half or more of the countries in the table report output falling in January and in February. This is not a stabilizing condition.

All sectors show quarter-to-date (QTD) declines in the unfolding Q1 output stream, and only six countries show QTD output increases in progress. The breadth of output increases is poor, and their trends for growth are extremely poor. So I have to brand this rebound as technically visible in February alone, but in a broader perspective, conditions are weakening.

In terms of sectors, only one EMU-wide sector has a 12-month growth rate above its median pace—that sector is capital goods, with a ranking in its 57th percentile compared to the median whose ranking is 50%. Only six countries in the table have manufacturing growth rates that exceed their historic median pace. That makes the breadth of IP growth as weak as well.

Not reassuring There is nothing reassuring about the February IP report, and it precedes the onset of the Iran war. We have since seen very broad weakness ahead in the S&P PMI indexes. We are certainly headed for a difficult period ahead. Since the period of international disruption has just begun in March, we are entering this difficult time in a weakened position. It would seem to be a good time to get defensive since inflation is bound to go up and high oil prices will weaken demand and already are creating some significant local chaos in developing economics that already were hand-to-mouth.

Japanese industrial production in February declined by 1.1%, led by a 2.1% drop in manufacturing output. By sector, consumer goods output fell by 0.3%, intermediate goods output fell by 2.1%, while investment goods output dropped by a strong 2.5%, all on a month-to-month basis. Mining sector output fell by 1.5% in February, while utilities output fell by 3.8%.

Sequentially, however, Japanese output had been accelerating, up by 0.1% over 12 months, at a 4.5% annual rate over six months, and at a 7% annual rate over three months.

Manufacturing Manufacturing output is up at 0.3% over 12 months, at a 6.6% annual rate over six months, and by 11.7% annualized over three months.

Within manufacturing, consumer goods output is expanding at a strengthening pace, rising by 0.8% over 12 months, at a 4.8% annual rate over six months, and then at a 10.8% annual rate over three months. Intermediate goods output is flat over 12 months, rising at a 2.9% annual rate over six months, and at a 6.2% annual rate over three months. Investment goods output is up at a 7% annual rate over 12 months, at a 5.2% annual rate over six months, and at a 6% annual rate over three months. However, mining output is down year-over-year; output changes get progressively worse from 12 months to three months. Utilities show a 4.8% decline over 12 months, decline by 3.2% at an annual rate over six months, and then fall at a 4.7% annual rate drop over three months. Mining and utilities sectors are experiencing more in the way of contracting effects.

Quarter-to-date Reported on a quarter-to-date basis (two months into Q1), total industry output is up at a 7.3% annual rate, with manufacturing up at a 15.2% annual rate on the same basis. For sectors, however, the strength is in consumer goods and investment goods where output is increasing at an 11.9% annual rate in the quarter; intermediate goods output is up at a 9.3% annual rate quarter-to-date. Mining output shows a decline at an annual rate in the quarter-to-date, while utilities output posts an increase.

As the chart makes clear, Dutch exports and imports are driven by very complementary forces and tend to track one another closely. Both flows boomed when COVID ended, slowed to a contraction in 2023, and then recovered to maintain steady levels (growth rates that hugged a zero-percent growth rate) from mid-2024 to late-2025. Recently, exports and imports have begun to weaken, with both flows showing contraction over 12 months. Goods imports are falling at a 5.5% pace as exports are falling at a 4% pace.

As for intra-year trends, the sequential growth rates show exports have transitioned into a progressively more contractive mode, while imports have declined over 12 months, six months, and three months, but without a clear signal on whether the trend is getting better or worse.

Of course, the trade flow depends on price trends and economic trends; both are under strain and uncertainty.