RaboResearch - Economic Research

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Dutch third quarter GDP growth disappoints

Economic Update

  • Dutch economic growth 0.1% in third quarter of 2015
  • Gradual rise in inflation
  • Unemployment remains high

According to the preliminary estimate from Statistics Netherlands regarding third quarter growth in 2015, Dutch GDP grew by 0.1% compared to the previous quarter. This weak performance in the third quarter is due to declining export growth, lower corporate investment and a lack of growth in private consumption. The fact that the volume of GDP increased at all is chiefly thanks to higher government spending and housing investment.

This is the second successive quarter with GDP growth of 0.1%. The low performance in the second quarter can be attributed to a one-off downward effect of gas production. However, the low GDP growth in the third quarter cannot be explained by any such isolated factor. Consequently, we regard this poor performance as downright disappointing. Although the possibility of stagnating growth may fit the picture of increasing international uncertainty, we do not yet see a reason to change our scenario of broadly based economic recovery in the Netherlands. We expect economic growth to pick up again in the coming quarters. That said, the rising uncertainty about the security situation in Europe in the wake of the Paris attacks constitutes a downward risk for growth in the Netherlands.

Table 1: Key Data, the Netherlands
Table 1: Key Data, the NetherlandsSource: Statistics Netherlands (CBS), Rabobank
Figure 1: Another quarter of low growth
Figure 1: Another quarter of low growthSource: Statistics Netherlands (CBS)

Inflation to edge upwards in the coming months

Figure 2: Inflation up in October
Figure 2: Inflation up in OctoberSource: Statistics Netherlands (CBS)

According to the European HICP index, inflation in the Netherlands edged upwards to 0.4% in October, on the back of higher prices for airline tickets and a less pronounced year-on-year decline in petrol prices. That said, inflation in the Netherlands and in most other EU states remains very low, and well below the 2% inflation target of the European Central Bank (ECB). The low inflation can largely be attributed to the downward effect of the fall in the oil price on fuel prices. In the coming months this effect will ease off, with a resulting rise in inflation of around 0.5% point. We expect inflation to gradually go up subsequently, and to reach an average of 1¼% in 2016. 

Unemployment remains high

In October, unemployment edged upwards to 6.9% of the workforce, caused by an increase in the labour supply. This puts unemployment back at the same level as May this year, indicating that improvements on the labour market are still unsatisfactory despite the economic recovery. Nonetheless, we expect employment to increase in the coming quarters. First, a number of leading indicators point to a recovery on the labour market. These include the rise in temping hours for ten successive quarters, now standing at a higher level than the previous peak in 2008 (see also Stijging uitzenduren wijst op verdere groei werkgelegenheid). The number of job vacancies has likewise been increasing - for nine quarters in succession.

Figure 3: Slight rise in unemployment
Figure 3: Slight rise in unemploymentSource: Statistics Netherlands (CBS)

Second, we expect the broadly based economic recovery to gain momentum in the coming quarters, which will lead to more jobs in the market sector. Finally, the number of layoffs in the public sector - particularly in health care - will decline. Consequently, the public sector will have a reduced downward effect on employment growth. Despite the increased employment, the drop in unemployment will be modest, as we anticipate a rise in the workforce. For 2015 we envisage an average unemployment rate of 6¾% and for 2016 a rate of 6¼%.

Martijn Badir
RaboResearch RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
+31 88 726 7864

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