Historic drop in producer confidence

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© Hollandse Hoogte / Westend61 GmbH
In April, producer confidence has plummeted to its lowest level since the start of the producer confidence survey in 1985 on account of the global response to the COVID-19 crisis. Confidence stands at -28.7 this month, down from 0.2 in March. This is by far the largest decline ever measured, as reported today by Statistics Netherlands (CBS). The historic drop was especially visible in expected industrial output, which tumbled to an unprecedented level.

The long-term average over the past two decades is 0.8. Producer confidence reached an all-time high (10.9) in February 2018 and has reached an all-time low (-28.7) in April 2020. Pessimism prevails among Dutch manufacturers for the first time since October 2014.

Opinions about future output have never been this negative

Dutch manufacturers have never been more negative about their future output than this month. The deterioration of their opinions on future output and order position was also unparalleled. Their opinion on stocks of finished products has also deteriorated significantly.

All component indicators of producer confidence are negative. Manufacturers who anticipate output decline over the next three months outnumber those expecting output growth. More manufacturers consider their order position to be weak rather than strong, given the time of year. There are more manufacturers who define their current stocks of finished products as too large rather than too small.

Producer confidence has eroded across the board

The decline in producer confidence was historic for all sectors of industry. The confidence index is also at an all-time low in all sectors, except in the paper and printing industry and the petroleum and chemical industry. The lowest confidence score was recorded in the transport equipment industry.

Historically low capacity utilisation rate

At the beginning of Q2 2020, the industrial capacity utilisation rate stood at 74.2 percent. This is the lowest level since this survey was implemented in 1989.

Confidence among German manufacturers also historically low

Germany is an important foreign market for the Dutch manufacturing industry. According to the IFO Institute, the Business Climate Index has fallen to its lowest level on record;it was only slightly lower in March 2009. The drop in confidence was the single most precipitous in 70 years of industry surveys. Similar to the Netherlands, expectations about future output have dropped to an historic low.

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