Dutch Manufacturing Outlook: Struggling with Weak Demand and Slow Path to Recovery

Dutch manufacturing outlook: Struggling with weak demand

With supply constraints diminishing, it is declining demand that is limiting industrial activity in the Netherlands. The picture differs strongly between industries. The large growth gap between energy-intensive and technological industries will narrow now that energy prices are sharply lower and demand has softened across the board.

 

Dutch manufacturing in a slump

Dutch manufacturing has seen production declining steadily since May last year. In recent months the outlook seemed to improve, partly due to the mild winter and declining gas prices, the reopening of the Chinese economy, and governments offsetting spikes in energy prices. However, both the Dutch economy and that of the key trading partners remain fragile.

Looking ahead, the demand for goods is not expected to increase significantly in the near future. Consumers are spending more on services instead of goods, and the remaining post-Covid catch-up demand is drying up. Additionally, higher interest rates will have an increasingly larger economic impact throughout 2023. Some recovery in the industry may occur in the second half of this year and in 2024, but the path to recovery will be less steep. We expect the sector to return to moderate year-on-year growth only in 2024.

 

A small contraction in 2023, moderate growth in 2024

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