Producer confidence almost unchanged

Producer confidence in the manufacturing industry hardly changed and was 3.0 in January 2006. For the fourth month in a row it is relatively high. The last time it was at a comparable level was in the first months of 2001, when the Dutch economy was in a period of high growth.

Producer confidence is the mood indicator for the manufacturing industry. The figure consists of three component indicators: expected production over the next three months, manufacturers’ opinions on the stock of finished products and the order position.

In January Dutch manufacturers, particularly manufacturers of semi-fabricated goods, are more optimistic with respect to their future output. Producers of investment goods are also slightly more positive about the position of their stocks. Manufacturers are, on the other hand, more negative about their order positions. This applies in particular to producers of consumer goods.

Due to sustained producer confidence, manufacturers are less inclined to cut back on staff. Only 13 percent intend to reduce staff, whereas 9 percent have plans to recruit new staff in the coming quarter. Producers in manufacturing industry have not been so positive since June 2001.

An increasing number of manufacturers expect higher prices. In January, 23 percent expect to raise prices of their products, as against 11 percent who expect lower prices. Producers of investment goods and semi-fabricated goods expect higher prices, producers of consumer goods, on the other hand, anticipate prices to fall.

According to the Institut für Wirtschaftsforschung (IFO), producer confidence of  German manufacturing companies strongly improved in January. German manufacturers are more confident regarding their current situation and their business expectations for the next six months. Export expectations have also improved.

Just as in the Netherlands the IFO indicator of producer confidence in Germany has shown an upward trend since last summer. A Focus article released on 11 January in the Economic Monitor pursues the similarity between the Dutch and the German economic development in the past years.

Producer confidence in manufacturing industry