Regular readers of this blog know that I like referencing the Netherlands as the 'leading' indicator for the Euro area growth for a number of reasons:
- The Netherlands have a stable, even 'boring' economic make up, combining (despite a relatively small size) healthy drivers of domestic demand and investment with robust exporting economy;
- The Netherlands supply side of the economy is also relatively well balanced with strong domestic and exports oriented manufacturing and services;
- The Netherlands are a major entry port for the Euro area imports and the shipping and logistics hub for its exports;
- The Netherlands are well-positioned to serve as lead indicators for household investment cycles changes.
With that in mind, yesterday's PMI for Manufacturing is disappointing:
Several things come to view:
- Dutch manufacturing posted a "broadly flat output in December. This reflected a combination of a slower fall in new orders and a further reduction of backlogs. Jobs were cut at a weaker rate, while input price inflation eased and output charges were raised at a faster pace.
- NEVI PMI rose to 49.6 in December from 48.2 in November, marking the highest reading in three months. Despite this, the index remained below 50.0, implying stagnation-to-reduction in activity. The index is compounding, which means that December decline came on top of declines in November and October.
- New orders fell for the third month running in December, although at slowest rate of decline.
- Export sales rose for the sixth consecutive month, although the increase was the slowest in 6 months period.
- Input prices eased, but remained in strong inflationary territory, while output prices rose modestly. This means profit margins shrunk.
Not quite ugly, but certainly not pretty.