RaboResearch - Economic Research

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Second-quarter Dutch economic growth adjusted upward

Economic Update

  • 2015Q2 growth adjusted upwards to 0.2%
  • Strong export growth in recent months
  • Consumer spending weak
  • Inflation falling sharply

In its second estimate, Statistics Netherlands (CBS) has made an upward adjustment for Dutch economic growth in the second quarter of 2015 from 0.1% to 0.2%. The increase reflects higher growth in various spending components, particularly housing investment, exports and imports. The differences in the GDP data are relatively small and our picture of the Dutch economy therefore remains unchanged.

Table 1: Key Figures The Netherlands
Table 1: Key Figures The NetherlandsSource: Statistics Netherlands (CBS), Rabobank

Thanks to increasing domestic spending, we expect to see broad-based economic growth in 2015 and 2016 (see table 1 for our Key Figures). That said, possible international developments could pose a downward threat to growth, such as a further slowdown in China's growth. (For more information about our growth expectations for the Dutch economy, see our Economic Quarterly).

Export growth continues

Dutch exports rose sharply in June, by 2.0% m-o-m (seasonally adjusted). Consequently, there was a further increase in momentum (growth of the three-month average) (Figure 1). These developments are in line with our expectations, and we anticipate a further rise in exports during the coming months. The euro is still relatively cheap vis à vis the currencies of our main trading partners outside the eurozone. Moreover, further growth within the eurozone will ensure additional export growth from the Netherlands to this region.

Dutch manufacturing output declined by 0.4% in July, with momentum weakening further. Manufacturing output has been disappointingly weak in recent quarters. The Dutch manufacturing PMI fell to 53 in September, following on an earlier sharp drop in August. Although this decline is an indication of a future slowdown in manufacturing output growth, the PMI is still well above 50, which points to future growth (figure 2).

Figure 1: Strong momentum in exports
Figure 1: Strong momentum in exportsSource: Statistics Netherlands (CBS)
Figure 2: Weak manufacturing development
Figure 2: Weak manufacturing developmentSource: Markit

Weak development in consumer spending

Private consumer spending contracted in July by 0.5% compared to the previous month. Momentum likewise remained very weak (figure 3). The consumption data of recent months are weaker than we had expected, because most factors point to stronger consumption growth. For example, real disposable household income is rising relatively sharply thanks to a combination of lower inflation, higher wage growth and increasing employment.

The relatively high consumer confidence is likewise a positive factor for household consumption. Although consumer confidence waned a little in September, the indicator remained positive, with respondents only showing less confidence in the general economic situation. However, the sub indicator spending willingness, which is a better predictor of future consumption, did rise and is now at its highest point in years (figure 4). It is partly for this reason that we expect to see a recovery in the growth of private consumption in the coming months.

Figure 3: Weak momentum in consumption
Figure 3: Weak momentum in consumptionSource: Statistics Netherlands (CBS)
Figure 4: Spending willingness at highest point since 2008
Figure 4: Spending willingness at highest point since 2008Source: Statistics Netherlands (CBS)

Sharp fall in inflation

In August European HICP inflation declined to 0.4%, as against 0.8% in July (figure 5). The drop was chiefly caused by lower prices for clothing and fuel. Fuel prices were down by as much as 9.7% on last year - a direct consequence of lower oil prices.

Figure 5: Inflation down again
Figure 5: Inflation down againSource: Statistics Netherlands (CBS)

Core inflation (inflation excluding food, energy and rents) fell from 0.9% to 0.5%. The fact that core inflation in the Netherlands is very low, as is the case in the rest of Europe, is an indication of the fragility of the economic recovery. Wage growth remains relatively low, on account of the high unemployment rate. In August, unemployment remained unchanged at 6.8%. In addition, companies are often unable to fully pass on higher purchasing costs to the consumer. We expect both inflation and core inflation to remain relatively low in the coming months, and to rise only gradually in 2016. 

Martijn Badir
RaboResearch Netherlands Rabobank KEO
+31 30 21 62666

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