Manufacturing industry still suffering from blow credit crunch

Output generated by the Dutch manufacturing industry was 2.4 percent higher in June 2011 than in June 2010. Production has been higher than one year previously for almost eighteen months now, although it is still below the pre-crisis level. Compared with June 2008, production in June 2011 was approximately 3 percent lower. Production growth slowed down in the first six months of 2011. Further improvement seems to be hampered by lack of demand.

Average daily manufacturing output (volume)

Average daily manufacturing output (volume)

Lack of demand for products main concern for manufacturers

One in five manufacturers have been affected by a lack of demand for products in the past few quarters. This is far more than before the crisis, when only one in twenty manufacturers were hampered by lack of demand. Shortage of staff and technical capacity have hardly impeded production recently. Most manufacturers did not encounter any obstacles, but at 65  percent the share was far lower than before the crisis. In the eighteen months prior to the crisis, about 75 percent did not encounter any problems. As a result of the lack of demand, inventories are currently piling up.

Factors hampering manufacturing production

Factors hampering manufacturing production

Inventories piling up

In 2011, manufacturers’ stocks of finished products were higher than in the preceding year, after a two-year decrease. In the second half of 2010, the decline had already become less substantial. While the volume of stocks increased, manufacturers’ opinions on their stocks deteriorated. The number of manufacturers who consider their stocks as too large is increasingly outnumbering the number who evaluate their stocks as too small. Because of the prolonged problems with demand, manufacturers are still utilising less production capacity than before the crisis.

Stocks of finished products manufacturing industry (volume)

Stocks of finished products manufacturing industry (volume)

Capacity utilisation rate remains low  

At the beginning of the third quarter, Dutch manufacturers were using about 81 percent of their production capacity. The utilisation rate has hardly changed in the last eighteen months. In the two years before the credit crunch, manufacturers consistently used more than 83 percent of their production capacity. At present, the utilisation rate is below the level of the beginning of the third quarter of 2008 in all sectors of manufacturing.

Capacity utilisation rate manufacturing industry

Capacity utilisation rate manufacturing industry

Karin van der Ven