Prospects for Investment Goods Dampened by Higher Interest Rates and Moderate Sales Expectations

Higher interest rates dampen prospects for investment goods

Higher interest rates and moderate sales expectations are inhibiting the need for expansion investments. This applies to both the manufacturing sector itself and the demand from sectors such as construction, which is experiencing a decline in investments in homes and commercial buildings. Financial surveys also indicate a decrease in investment demand.

In the first quarter of this year, investments in ICT equipment and machinery and other equipment in the Netherlands decreased by 6.2% and 0.6%, respectively. Overall, investments are under pressure this year and next, negatively affecting the demand for industrial investment goods such as machinery and equipment. However, investment expectations in the industrial sector itself are still relatively high due to sustainability requirements, capacity constraints – especially in the technological industry – and the need for expanding digitisation, automation, and robotics to mitigate the impact of labour shortages.

 

Many industries are still working overtime, while energy-intensive production is on the backburner

Deviation of current occupancy rate from long-term average, in percentage points

 

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Energy gap is closing, but growth remains subdued

The energy-driven growth gap between industry sectors is gradually disappearing. Nevertheless, we do not expect energy-intensive production to return to previous levels in the near future. Growth is being held back by economic headwinds and energy prices are expected to remain structurally higher than before. All in all, a slight contraction (-1.0%) in 2023, followed by moderate growth (1.5%) in 2024 seems the most likely scenario for Dutch manufacturing.