RaboResearch - Economic Research

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The Netherlands: economic growth figures produce another positive surprise

Economic Update

  • Recent monthly economic figures indicate strong growth in the fourth quarter of 2016
  • Strong growth in industrial production likely in the fourth quarter due to higher gas production
  • Inflation higher due to rising energy prices
  • Unemployment continues to fall sharply
  • Both consumer and producer confidence at highest level since the crisis

Recent monthly figures show that the Dutch economy has again moved up a gear. Household consumption rose further, while exports remained stable despite the international uncertainties. Confidence in the Netherlands is also high: both consumer and producer confidence are now at their highest levels since the crisis. Unemployment has also fallen sharply in the past months.

Table 1: Key data for the Netherlands
Table 1: Key data for the NetherlandsSource: Statistics Netherlands (CBS), Rabobank

These positive developments make it likely that we will see stronger growth in GDP volume in the fourth quarter of 2016 than we had previously expected. Economic growth in the fourth quarter of 2016 appears to have been further boosted by increased gas production as a result of the relatively cold weather and sharply higher gas prices in this period. Although it is difficult to make an exact prediction, partly due to adjustments, we think that q-o-q GDP growth of around 1 percentage point in the fourth quarter of 2016 is very possible. It is also therefore likely that our next economic forecast in March will adjust our expectation for economic growth in 2017 to the upside.

Strong rise in industrial production expected due to higher gas production

Figure 1: High growth of industrial production in last months of 2016
Figure 1: High growth of industrial production in last months of 2016Note: 3m/3m change of total industrial production and weighted industries.
Source: Statistics Netherlands (CBS)

Total industrial production rose strongly in November 2016 by 3.5 per cent m-o-m (seasonally adjusted). The momentum (3m-3m change) is now at the highest level in years (figure 1). The main reason was a strong increase in the mining and quarrying industry, driven by higher gas production. The manufacturing industry also grew strongly, by 1.4 per cent m-o-m. Over the fourth quarter as a whole, we expect to see industrial production make a strong positive contribution to gross domestic product, mainly due to the increase in gas production. Energy use was higher due to relatively cold weather in the fourth quarter, and more gas was used. Gas prices have also risen sharply in recent months, increasing the value added by the mining sector.

Inflation up due to higher fuel prices

Figure 2: Inflation rises
Figure 2: Inflation risesSource: Statistics Netherlands (CBS)

Inflation rose to 0.7 per cent in December 2016, its highest level in more than a year (figure 2). The increase was mainly due to higher energy prices, since core inflation (inflation excluding food, energy and rent) was still low at 0.3 per cent in December. Oil prices made a positive contribution to inflation (indirectly through fuel prices) in December for the first time in four years, standing at around 50 per cent higher in December 2016 compared to a year before. We expect inflation to rise further in the coming months, partly due to a more positive contribution from energy.

Unemployment continues to fall

Figure 3: Strong decline unemployment
Figure 3: Strong decline unemploymentSource: Statistics Netherlands (CBS)

Unemployment fell to 5.4 per cent in December 2016, driven by strong growth in employment (figure 3). The unemployment rate over the whole of 2016 was 6.0 per cent. Unemployment has fallen fast in recent months and is now at its lowest level in five years. The recent developments in the labour market have been a positive surprise. It is likely that we will adjust our expectation for unemployment further to the downside when we issue our next forecasts. Nonetheless, we think that the rate of decline in unemployment will slow, also because we expect more people to enter the labour market.

Confidence indicators at a post-crisis peak

Figure 4: Producer confidence at highest level since 2008
Figure 4: Producer confidence at highest level since 2008Source: Statistics Netherlands (CBS)

Looking ahead, both producers and consumers are highly confident about the state of the Dutch economy. Dutch consumer confidence in January 2017 was up to +13, well above the long-term average and the highest level seen since the crisis in 2008. Combined with higher disposable household income, this gives us confidence that consumers will increase their spending on goods and services in the coming period. Producer confidence also rose in January to its highest level since 2008, meaning that a further increase in manufacturing production is likely (figure 4).

Martijn Badir
RaboResearch Netherlands Rabobank KEO
+31 30 21 62666

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