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Wednesday, 13 April 2011

Very strong growth in output and turnover figures industry. Export as well is strongly growing: is it an economic boom?! And if it is, why does the Baltic Dry index stay behind so much?

The Dutch Central Bureau for Statistics (CBS) presented the latest data on the Dutch manufacturing industry. And these figures looked very strong. There was a substantial growth in output:

Substantial growth manufacturing outputThe average daily output of Dutch manufacturing industry was over 9 percent higher in February 2011 than in February 2010. Output growth was more substantial than in previous months, though still marginally below the pre-crisis level. Output growth was unevenly spread across the various sectors of manufacturing industry. The most substantial growth was recorded in the sector transport equipment (+42 percent). The increase in manufacturing output in electrical engineering and machinery was more substantial (+16 percent) than in February 2010. Output levels in basic metals and metal products and in petroleum, chemical, rubber and plastic products also increased. The least substantial output growth was reported in food, drinks and tobacco (+3 percent).Wood products and construction materials showed substantial output growth for the second consecutive month. February’s output was 25 percent up on one year previously. In 2009 and 2010, output in this branch contracted considerably.
 Seasonally adjusted figures provide a more reliable picture of short-term production developments. Monthly figures adjusted for seasonal variation often show a somewhat erratic pattern. Therefore, the two-monthly average compared to the previous two-monthly average is a more accurate indicator. After correction for seasonal variation and the number of working days, manufacturing output in the period January –February 2011 was more than 3 percent up on the period November  December 2010.
Manufacturing output (volume)

 It is of course good news for the Dutch industry that the output is growing. The Dutch industry is still a large driver for jobs and after the disastrous year 2009 and the year-of-marginal-recovery 2010, it could very well be that 2011 ends a much better year for the Dutch industry. However, one should not forget that an average growth of 7% in 2010 and a projected average growth of 8% in 2011 are hardly enough to return to the mid-2008 level.

And like always, there are some “but´s” in these figures. Therefore we need to take a look where the growth was:


Transport equipment


Wood products and construction


Electrical engineering and machinery



Since the number of transported metric tons contracted strongly in 2008 and 2009, there arose an enormous surplus of transport companies and equipment. This led to heavy customers pressure on transport contracts and prices. Immediate results were the hiring of cheap East-European drivers and the maintaining of economically written-off trucks to save costs. As the transport sector was growing substantially again in 2010, this lifted the pressure on prices and made it possible to replace those trucks and other transport materials.

However, I suspect that this restoring action will not last for the coming years. And I think the same was happening with Electrical Engineering and Machinery. There was probably also a kind of restoring action going on for the last three years. Also the growth in this market will probably not last.

And although the figures in the wood products and construction materials look smashing too (+25%), one should consider that commercial(CRE) and residential (RRE) real estate had two terrible years behind them. And I am – frankly speaking – very pessimistic on these markets. The RRE is still locked-up very badly and the CRE market? Please, don´t ask.

Unprecedented growth manufacturing turnover
Dutch manufacturers realised a turnover growth by more than 23 percent in February 2011 relative to the same month in 2010. This is the highest turnover growth ever measured in manufacturing industry. Prices of manufactured products were more than 11 percent higher than one year previously. The sector transport equipment showed the highest turnover growth (+36 percent). Electrical engineering and machinery (+33 percent) and basic metals and metal products (+27 percent) also realised far higher turnover levels. The turnover growth in the sector petroleum, chemical, rubber and plastic products (+28 percent) and the food sector (+13 percent) was almost entirely accounted for by higher prices.Turnover on the domestic market was 21 percent higher in February than one year previously.  A growth figure of this magnitude has not been realised in the last four years. Turnover growth on the export market was even higher (+25 percent).

Manufacturing turnover

Also these results look very promising on first sight. But let´s look at the figures more closely:

Transport equipment
Electrical engineering and machinery
Petroleum, chemical, rubber and plastic products
Food sector

The turnover growth in the transport equipment sector is 6% less than the output growth in the same sector. When prices would be stable or even rising, one would expect at least the same growth in turnover as in output.

The turnover does rise sharply in Electrical engineering and machinery, especially when compared to the 16% growth. I suspect that this is caused by the soaring prices for copper, brass and other raw materials used in the electrical engineering industry.

And the growth in turnover in Petroleum etc. can even be considered disappointing when you look at the soaring oil prices.

There was also a remaining growth in the Dutch exports. That is good news for Dutch transport, shipping and warehousing companies.

Sustained exports growth

The volume of exports of goods was more than 7 percent higher in February 2011 than twelve months previously. This is almost the same growth rate as in January. The volume of goods imports was 10 percent higher, a substantially larger rise than in January. Volume figures have been adjusted for the number of working days.
Improvements and deteriorations keep each other in balance in April’s Exports Radar

The value of  exported goods totalled 32.9 billion euro, 19 percent more than one year previously. The value of imports grew by 22 percent to 29.0 billion euro. The trade surplus amounted 3.9 billion euro, the same as in February 2010.
The value of imports and exports of raw materials and mineral fuels was distinctly higher than twelve months previously. Imports of chemical products, food en beverages grew strongly too.
Exports to EU countries grew slightly faster than exports to non-EU countries. Imports show the opposite pattern.
Export prices were 10.6 percent higher than twelve months previously, import prices were 10.8 percent higher. As a result, the terms of tradedeteriorated marginally compared with February 2010.

Goods exports (volume adjusted for working days)

In this case the figures show marginal growth, compared to the comfortable double-digit growth of 2010. And one should also remember here that an average 13% growth in 2010 and an average projected growth of 5% in 2011 is not enough to make up for 2009.

There is another worrying fact in these figures: the trade surplus of €3,9 bln. This means that The Netherlands is exporting 13.5% more than it is importing. About the same is true for Germany. A professor put it down very sharply in an interview on BNR (Dutch Business News Radio): Germany´s and our export surplus is some other countries´ import surplus. And those countries might very well be the PIIGS and especially Spain. This country suffers from an unemployment rate of 20% and a totally messed-up CRE and RRE market.

The fact that this country has a substantial import surplus, probably advanced by Dutch and German loans, is a worrying fact for the trade balances in Europe.

And if you want to know why I think these export figures are only intra-European exports, then you should have a look at the latest Baltic Dry Index (BDIY) figures.

This BDIY states the average cost per metric ton of sea transport. These figures are tell-tale data:

BDIY 6 Months average (

BDIY 5 Yr average.( 

Especially if you look at the 5Y average, it becomes clear that the current index rate is only 500 points above the 5Yr low in 2008 and an incredible 10,400 points below the 5Yr high in 2008. This means that international shipping is still hanging on by the skin of its teeth and seems to be nowhere near economic recovery. This, added to the inflationary news coming from the BRIC´s makes you think about the strenght and stamina of the economic recovery.

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