Dutch Economy Set for Contraction in 2013


The Netherlands economy has been deteriorating since Q4 of 2011 and it is likely that the recession will extended further into 2013. In fact, tight austerity measures, adopted in the wake of its housing-market collapse, have damaged the job market and household consumption.

Indeed, the real estate bubble created in the last few years due to easy access to credit has brought Dutch households debt-to-income ratio to 250 percent, the highest in Europe. And as the bubble has burst, it has been impacting the entire economy down. In fact, VAT increases and other tax hikes along with soaring unemployment, placed consumer confidence near all-time lows in the past few months. As a result, in Q4 of 2012, consumer spending decreased to its lowest level since 2001 while retail sales fell for the 7th month in a row in March. As for the supply side, business confidence has been weak for the last two years and industrial production contracted in the first three months of the year. More importantly, exports, the traditional motor of the economy, have been weaker-than-expected and were broadly unchanged year-on-year in February.


In Q4 of 2012, Netherlands GDP fell 0.4 percent qoq and 1.2 percent yoy. The economy has been contracting year-on-year since Q4 of 2011.
 
Business confidence has been negative since mid-2011 and fell 0.8 points to -5.6 in April. Exports dropped 2.8 percent mom and remained unchanged yoy in February.

Although Consumer confidence improved in April, it has been in the negative territory since 2007. As such, consumer spending has been plunging and hit its lowest level in over a decade in Q4 of 2012.
 
In March, the jobless rate reached a record high of 8.1 percent, meaning 643 thousand people are out of work.

 


Nuno Fontes | nuno@tradingeconomics.com
5/14/2013 9:23:02 AM