Orders push up producers' confidence to record level

Producers’ confidence rose to a record level in July 2006. The confidence of manufacturers has improved substantially in the last 12 months. The main reason for this is that they are more satisfied with their order books. The opinions of producers of investment goods, in particular, about orders on hand have improved considerably.

Manufacturers very satisfied with orders

Producers’ confidence rose by nearly 13 points from July 2005 to July 2006. The improved sentiment among producers is mainly based on their opinions on orders received. This component indicator rose by no less than 18 points. Expectations about future production were also clearly more positive in July 2006 than in July 2005. Opinions on stocks of finished products also improved, but by less than the other component indicators.
Manufacturers saw orders increase in the last 12 months and their satisfaction increased accordingly. The order books index (orders on hand in terms of months work) rose from 97.2 in July 2005 to 104.1 in July 2006. 

Producers’ confidence and underlying factors

Producers of investment goods very satisfied

Producers in the manufacturing industry can be divided into three sectors in accordance with the products they make: consumer goods, semi-manufactured goods and investment goods. In all three sectors companies are much more optimistic than twelve months ago.

Opinions on orders improved most among producers of investment goods. Producers of consumer goods and semi-manufactured goods, too, were clearly more positive about orders on hand. So companies across alls sectors of manufacturing were more optimistic in this respect.

Component indicators of producers’ confidence

 
The other component indicators also show positive developments, but the differences between the sectors are larger. Producers of consumer goods, in particular, were much more positive in July 2006 than in July 2005. Satisfaction with stocks of finished products did drop slightly in this sector, however. In contrast: producers of semi-manufactured products were more positive on this component, and more reserved about expected production.

Sidney Vergouw