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The Netherlands: cautious economic recovery continues

Economic Update

  • Estimated GDP growth for 2014Q3 adjusted slightly downward in second CBS estimate
  • Growth expectations for 2014 and 2015 unchanged
  • Further improvement in manufacturing output and exports anticipated
  • Recovery in household consumption with ups and downs
Table 1: Key Data, the Netherlands
Table 1: Key Data, the NetherlandsSource: Statistics Netherlands, Rabobank

Statistics Netherlands (CBS) has made a slight downward adjustment to its growth estimate for Dutch real Gross Domestic Product (GDP) in the third quarter of 2014. This means that instead of +0.2%, growth was 0.1% compared to a quarter earlier. This makes no difference to the picture for the Dutch economy and our growth expectations, which remain unchanged. For 2014 as a whole, we assume GDP growth of ¾%. In 2015, growth will continue thanks to exports picking up and increased private consumption. Accordingly, the economy can be expected to grow by 1½% (Table 1). 

More confidence among producers

In December, the Purchasing Managers Index (PMI) in the manufacturing industry slipped to 53.5, having reached the highest level in nine months in November, at 54.6. Since mid-2013, the index has registered over 50, which is roughly the line between growth and contraction. Producer confidence in the manufacturing industry, as measured by Statistics Netherlands, rose to 3.4 in December, reaching the highest point since spring 2011. This points to a positive development in manufacturing output. With domestic demand still weak, we expect the improvement to be relatively more pronounced in the export-oriented sectors of Dutch manufacturing. That said, the slight rise in production volume in the manufacturing industry continued to lag behind the positive sentiment up to and including October (Figure 1).

Figure 1: Further rise in producer confidence
Figure 1: Further rise in producer confidenceSource: Statistics Netherlands, Rabobank

The seasonally adjusted export volume increased in the third quarter of 2014 by 1.2% compared to the second quarter. The increase was entirely due to the large rise in exports in September. In October, the export volume dropped slightly by 0.3%, month-on-month. That said, momentum remained just about positive in October, at +0.3%. Although downward risks remain on account of geopolitical tensions, we are assuming exports will grow in the coming quarters. Moreover, sentiment indicators for important trading partners, such as the US and the U.K. point to growth in Dutch exports during the coming months (Figure 2). Exports will be furthermore boosted by a depreciation of the euro vis à vis the US dollar and sterling (Figure 3).

Figure 2: Positive sentiment among trading partners
Figure 2: Positive sentiment among trading partnersSource: Macrobond
Figure 3: Euro loses ground
Figure 3: Euro loses groundSource: Macrobond

Contribution of consumers set to increase

In the third quarter of 2014, household consumption rose by 0.1% q-o-q, having grown by as much as 0.4% in the second quarter. This pattern can be partly explained by the normalisation of gas consumption, which had a flattering effect on consumption growth in the second quarter. Momentum (0.2%) remained weak in October. The recovery in consumption is somewhat unsteady, but we expect it to be boosted in the coming quarters by a number of factors. These include positive developments on the housing market, further recovery in employment and increased real disposable household income.

In recent months consumer sentiment has been rather volatile. In December, the confidence index rose to -7, having deteriorated markedly in November vis à vis October (Figure 4). This volatility is chiefly reflected in the sub indicator measuring sentiment in relation to the economic climate. By contrast, willingness to buy remained stable in December, as in previous months. With regard to making large purchases, consumers seemed less negative. This indicator reached its highest level in five years. This is in line with confidence in the housing market. In December, the ‘Eigen Huis’ market indicator of the Homeowners' Association (Vereniging Eigen Huis) remained unchanged at 105, which is the highest level since the indicator was introduced in 2004, and points to an increase in the number of houses sold.

In November, unemployment remained stable compared to October, at 6.5% (Eurostat/ILO definition). In the two previous months, unemployment was likewise stable, because the rise in employment was accompanied by an increase in the labour force (Figure 5). Thanks to the more favourable economic conditions, more people are seeking employment. However, we expect to see a modest decline in unemployment in the coming quarters on account of positive labour market indicators such as a rise in the number of vacancies and further economic recovery.

Figure 4: Consumer confidence showing volatility
Figure 4: Consumer confidence showing volatilitySource: Statistics Netherlands, Rabobank
Figure 5: Labour force increases again
Figure 5: Labour force increases againSource: Statistics Netherlands
Björn Giesbergen
RaboResearch Global Economics & Markets Rabobank KEO
+31 88 726 7864

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