Nevi Dutch Manufacturing PMI rises to neutral 50

The overall score of the Nevi Dutch Manufacturing PMI is a weighted average of sub-indicators for the number of new orders (30 percent), the volume of production (25 percent), employment (20 percent), delivery times (15 percent) and the inventories of purchased parts and materials (10 percent). The sub-indicator for new orders is the only one that exceeded 50 in February, while the other sub-indicators were still below 50. The increase in the number of new orders may be a harbinger of recovery.

Trump depresses investments

The recovery is undetermined due to Donald Trump's erratic behaviour. Respondents to the Nevi Dutch Manufacturing PMI had until February 20 to answer questions. On February 10, Trump already introduced an import duty of 25 percent on steel and aluminum. On Wednesday, February 26, however, the American president also announced that he wants to introduce import duties of 25 percent on other European products. In his first term as president, Trump made similar statements, but after negotiations with the European Commission in 2018, most of the announced tariffs ultimately fell through.

Last week, the European Commission reported that it would respond "immediately and forcefully" to Trump's import duties. In 2018, the European Union already introduced import duties on Harley-Davidson motorcycles, among others. It is uncertain whether there will be import duties this time, how high they will be, and which products may be exempt. However, there is a clear risk of a trade war and it is possible that this uncertain situation will make entrepreneurs wary when making investment decisions. This can put pressure on the demand for machines, for example.

Approximately 5 percent of Dutch exports of goods are destined for the United States (US). Import duties could depress Dutch exports, for example the export of steel, car parts, chemical products, medicines and foodstuffs. The US is an important export market for beverages in particular, so the packaging industry may be indirectly affected by import duties. All kinds of machines and equipment are also often exported to the US. For example, in 2023, the US accounted for no less than 22 percent of the total export value of machinery for the food industry, according to figures from Statistics Netherlands (CBS). However, their customers are probably relatively insensitive to a higher price.

Salvation for energy-intensive industry?

On Wednesday 26 February, the European Commission presented many new proposals to improve the competitiveness of European industry, such as the Clean Industrial Deal and the Action Plan for Affordable Energy. Since the 2022 energy crisis, which was fuelled by the Russian invasion of Ukraine, production in energy-intensive industries such as the steel industry and the chemical industry has been under particular pressure.

The Commission proposes to reduce energy costs for companies. In line with the recommendations of Mario Draghi's September report, the European Commission aims to accelerate the sustainability of the energy supply. For example, the Commission's proposals presented last week include a plan for a €100 billion 'industrial decarbonisation bank' to finance investments needed to reduce CO2 emissions from industry. The Commission also announced last week that it wants to improve the connections between electricity grids of different member states, with the aim of improving the functioning of the electricity market.

Furthermore, the Commission is mainly looking for more state aid for energy-intensive sectors. Last week, for example, the Commission proposed that member states reduce the tax on electricity and partly finance the rapidly rising costs for electricity grids from the budget. The rules for state aid will be simplified. It seems that it depends to a large extent on the individual member states whether energy costs and network tariffs for industry go down.

It remains to be seen whether the Dutch government will offer more financial support to energy-intensive industry. At the moment, the network tariffs for Dutch industry are much higher than those in surrounding countries, and industrial companies in those countries also receive ample compensation for carbon taxes, according to research commissioned by the Ministry of Economic Affairs and Climate in April last year.

Last week, the Commission also presented the 'Omnibus Simplification Package', with proposals to limit the administrative burden for companies, for example by not also requiring medium-sized companies, but only the largest companies to report under CSRD, CSDDD, CBAM et cetera.

The proposed adjustments to procurement procedures are also important. It should be possible for European suppliers to have an advantage over Chinese competitors, for example. European manufacturers of electric buses, among others, could benefit from this.