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Thursday, 26 May 2011

Moods and trends in The Netherlands are quite negative: Time to become bullish again?

One of the smartest professors at Minyanville (, Professor Kevin Depew, often says (in a little different words): 
  • If the socionomic mood is so positive that even the taxi drivers are talking about investments and stock trading, than it is time to become bearish. 
  • On the other hand, if the socionomic mood is so negative that it is hardly possible to find any positive news whatsoever, than it is time to become bullish again. 
It is good to look at the latest figures of the Dutch Central Bureau of Statistics ( with these statements in mind. 
Producer confidence drops back further
Producer confidence fell slightly in May. The indicator stood at 3.1, as against 4.6 in April. The indicator dropped because manufacturers’ opinions on their order positions deteriorated considerably. The producer confidence index declined for the second month in a row in May. In March, producer confidence had reached the highest level in three years with 5.8.

Producer confidence consists of three component indicators: manufacturers’ opinions on their order positions, the expected output in the next three months and manufacturers’ opinions on their stocks of finished products.

Opinions on order positions deteriorated considerably, but manufactures were slightly more optimistic on their stocks of finished products in May than they were in April. Expectations on their output over the next three months hardly changed.

Just as in the preceding months, manufacturers anticipated an increase in factory gate prices over the next three months. The number of manufacturers expecting employment in their branch to rise was about the same as the number expecting employment reduction. With 104.5, the order position index (orders received expressed in months of work) was slightly below the level in April.
Producer confidence in manufacturing industry
The main problem with the industrial production is still that the domestic business-to-consumer market is not improving very much. 

The consumption could increase slightly in the coming months now the vacation bonus has been paid for 2011. The structural consumption, however, is still wel below 2007 levels and will presumably remain there, due to worries on the economic crisis in the Euro zone. This means that goods nowadays are especially produced for other businesses (business-to-business) or for the export. 

Both categories can be expected to suffer from the economic worries on the PIIGS-countries, especially Greece, Portugal and Spain.

Providers of business services slightly less optimistic
Providers of business services were slightly less optimistic in May about their future turnover than in April. The number of business services providers anticipating turnover growth during the next three months still outnumbered those anticipating a decrease, but, with +15, the difference between optimists and pessimists was reduced relative to April (+23).

Providers of business services were also less optimistic about future employment and the economic climate in their sector. The number of business services providers expecting price increases in the three months to come was about the same as the number expecting prices to drop.

Just like in the previous months, temp job agencies were in high spirits. They were very optimistic about their future turnover and the economic climate. They also still expected to hire more staff in the next three months. The mood was less optimistic among other providers of services within the sector business services.

Expected turnover business services

It is hard to assess these figures and figure out their value in the economic development. Take for instance the optimism in the temp employment agencies. 

The fact that these are very optimistic can point out that there is economic growth, but that this growth is not strong enough for companies to hire steady employees. That is as much a bullish as a bearish signal.
Other providers of business services are less optimistic. Can this be, because the large employers (banks, insurance companies and other large employers) put pressure on them to lower their prices? That would be a deflationary (= bearish) signal, instead of a bullish signal.
Drop in house prices considerably more substantial
Prices of existing owner-occupied houses were on average 2.1 percent lower in April 2011 than in April 2010. 
According to the price index of existing residential property – a joint publication by Statistics Netherlands and the Land Registry Office – house prices dropped more dramatically in April than in March, when they were 1.1 percent lower than one year previously. 
All types of dwellings were cheaper in April 2011 than in April 2010. Prices of detached houses dropped most (4.6 percent). Prices of terraced houses decreased by only 1.2 percent.Prices fell in all provinces except in Zeeland. With 4.0 percent, residential property prices declined most in Flevoland. 
Prices in Zeeland were 0.8 percent up.Prices of existing residential property units dropped by 0.3 percent relative to March 2011. In March, prices were marginally higher than one month previously.Over 10 thousand existing residential property units changed hands in April, i.e. a decrease by 9 percent from April 2010. 
With over 12 percent, sales of apartments dropped most. The number of detached houses sold, on the other hand, increased by over 2 percent.  Altogether, the number of sales in the first four months of 2011 was marginally lower than in the first four months of 2010.

Prices of existing own homes

I wrote many articles on the Dutch housing market:

For the steady readers of my blog (thank you all and please keep on reading), the figures mentioned here cannot come as a surprise. The housing market is still very much locked up and this little drop in prices will do absolutely nothing about it. The Dutch powers-that-be keep the prices artificially high, instead of letting them go and perhaps compensate the homeowners that get into financial trouble.

Normally stable prices are a bullish sign, but for me these stable housing prices are a bearish sign. It means that the problems on the housing market will remain there for years to come and nobody is willing to do something about it. 

Mood among Dutch consumers remains gloomy
The mood among Dutch consumers remained gloomy in May, the consumer confidence index stood unchanged at -10. Consumers were less confident about the economic situation in general. Their willingness to buy increased marginally, but remained at a low level.

Consumer confidence

The mood about the economic climate was more negative in May than in April. This component indicator of consumer confidence dropped 3 points to -9. 
Consumers were obviously more negative about the economic climate over the past twelve months, but their opinions on the economy in the next twelve months hardly altered.The component indicator willingness to buy increased by 1 point and stood at -11. Willingness to buy remains low. 
The modest improvement in May was entirely due to consumers’ conviction that the time was more favourable to buy expensive items than in the preceding month. Opinions on their own financial situation, on the other hand, were slightly more pessimistic than in April.

Consumer confidence, seasonally adjusted

It is absolutely no surprise that consumers are still very bearish in their opinions. People notice that the housing market is not unlocked yet, making it for starters virtually impossible to purchase a house. People are also worried on:
  • the near-future cutbacks by the government, concerning subsidies on child care and tax breaks on their environmentally friendly car 
  • their pensions and their savings, choked to death by the low interest rates 
  • the developments in the PIIGS countries that might cost them lots of tax money in the near future. 
    • People don’t believe the government when it promises that guarantees and loans to Greece and Portugal won’t cost the Dutch taxpayers anything. People know this is a blatant lie. 
Don’t expect the Dutch citizens to become more optimistic very soon, as almost all politicians are busy with maintaining the current messed-up situation, instead of clearing the road for a new period of economic growth.

All in all these figures of the CBS were quite bearish. But be aware of the truthfulness of this saying: ‘it is always darkest just before dawn’. Dawn might be underway sooner than you might expect

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