RaboResearch - Economic Research

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The Netherlands: waiting for recovery

Economic Update


The size of the Dutch economy is likely to have contracted again in 13Q2. The contribution of international trade to GDP volume is probably low or even negative. In May, consumer spending was boosted by high gas consumption, but this effect will likely have disappeared in the following month. The manufacturing industry commenced the second quarter with a contraction. In the second half of this year economic growth can be expected to pick up owing to an upsurge in international trade. Nonetheless, we expect total GDP volume for 2013 to be down by 1¼%. Nor do we expect economic growth in 2014.

Year-on-year change in %

Export growth picking up

In May, the volume of goods exported in-creased by 3.4% m-o-m. However, this followed a contraction of 1.4% in April, which means overall export growth for the second quarter is likely to be disappointing. Imports rose 2.6% m-o-m in May, following on a rise of 2.7% in April. Because growth in exports lagged behind import growth in April and May, international trade in 13Q2 is likely to have contributed little to GDP volume or may even have contributed negatively. For the second half of the year we expect higher growth in exports as the recession ends in the eurozone and growth picks up in the rest of the world.

Imports and exports

Capacity utilisation improves

In May, output in the manufacturing industry declined by 0.5% m-o-m, following meagre growth in April. If production levels remain unchanged in June, second quarter growth will amount to -0.2% q-o-q, considerably better than the contraction of 1.7% in the first quarter. In July the purchasing managers' index (PMI) rose to over 50, reaching the highest level in two years. This supports our expectation that a modest, export-led recovery in production is imminent. Despite the unimpressive production figures, capacity utilisation in the manufacturing industry rose from 75.6% in April to 77.4% in July. Nonetheless, capacity utilisation is still very low, which means corporate investment will remain weak.

Capacity utilisation

Source: Statistics Netherlands

Gas usage boosts consumer spending

Household consumption stagnated in May, following a contraction of 1.2% m-o-m in April. In May, spending was boosted by the unusually cold weather, which resulted in greater gas consumption. Because it was not unusually cold in June, the upward effect will probably disappear next month. This means that on balance, consumer spending will likely have shrunk in the second quarter, whereas there was slight growth of 0.1% in the first quarter. For the remainder of the year and next year we likewise expect the trend to be downward, due to a further drop in real dis-posable household income.

Dutch household consumption

Source: Statistics Netherlands, Rabobank

A further blow to consumer confidence

In July, the confidence indicator measured -38, a deterioration of 2 points compared to June. This was the second successive month of declining consumer confidence. Consumer sentiment regarding the economy deteriorated by 4 points, falling to -57. The drop could be attributed to the sub-index 'economic situation in the next 12 months'. Willingness to buy in July remained at the same level as the previous month. However, the sub-index 'financial situation in the next 12 months' declined by 4 points. Accordingly, there is as yet no sign of confidence recovering.

Consumer confidence

Source: Statistics Netherlands

Unemployment rises further

In June, the unemployment rate rose by 0.2%-point to 6.8%. A decline in employment and an increase in the labour force contributed in equal measure to the rise. That said, the absolute contraction in employment was lower than in the previous two months. In 13Q2 as a whole, unemployment grew by 0.4%-point, slightly less than the increase of 0.6%-point in the first quarter. Owing to government cutbacks and the lack of economic growth, employment will decline further this year and next. Accordingly, the unemployment rate is expected to increase further from 6¾% this year, to 7½% next year.

Unemployment, employment and labour force

Source: Statistics Netherlands


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