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Saturday, 29 October 2011

Latest figures on the Dutch economy: economic situation deteriorating. Manufacturer’s prices stable, but ready to make a tumble?

Yesterday, the Dutch Central Bureau for Statistics presented two new research results.

The economic situation for October and the manufacturers’ price development until September.

Here are the important data from both investigations.

Analysis October:

Overview economic situation ( to enlarge
 The economic situation at the end of October was worse than at the end of September. Indicators showed further deterioration across the board. The heart of the scatter in the Business Cycle Tracer is located in the recession stage. Eleven of the fifteen indicators are currently below the level of their long-term average.

In the course of October, new data have become available for all monthly indicators. The distribution of the indicators across the quadrants changed somewhat. Household consumption moved back from the yellow to the red quadrant.

The Tracer shows more serious downturns at the end of October relative to the end of September. Within the red quadrant, orders, producer confidence, consumer confidence and unemployment moved considerably downwards. In the orange quadrant, manufacturing output moved downwards and somewhat to the left. The Tracer also shows an improvement. In the red quadrant, the capital market interest rate moved upwards and to the right.

At the end of October, the heart of the scatter in the Tracer is located in the red quadrant (indicating recession). Eight of the fifteen indicators are in the red quadrant, three in the yellow, two in the green and two in the orange quadrant. The growth rate of indicators in the red quadrant is below their long-term average and slowing down. The growth rate of indicators in the yellow quadrant is also below their long-term average, but accelerating.

The growth rate of the indicators in the green quadrant is above their long-term average and accelerating. The growth rate of indicators located in the orange quadrant is also above their long-term average, but slowing down.

The above standing chart (courtesy of is actually quite hard to read. At least for me it was, initially. Shortly summarized. The upper right quadrant (increasing and above trend) is ‘good’, the lower left quadrant (decreasing and below trend) is ‘bad’.
Although Exports, Temp jobs and to a lesser degree Bankruptcies, Manufacturing, Jobs, Vacancies and Fixed capital formation look all right, there is a definite trend going on towards the lower left quadrant of the chart. 

Though the situation is not as bad yet as in January 2009, the trend is worsening. For a better illustration, please have a look at the site of the Dutch CBS (by clicking the link), where this chart can be seen as a running chart.

This chart definitely predicts bad news for the coming months and I would not be surprised if the economic downturn in 2012 will be worse and (much) longer lasting than in 2009. As I stated many times before: in The Netherlands we didn’t feel much pain yet of the biggest crisis since 1929. Now it might be that the pain is coming after all.

Selling prices in Dutch manufacturing industry were nearly 10% higher in September 2011 than in September 2010. The price increase is the same as in August.

Manufacturing prices rose across the board relative to September 2010. With 31%, prices of refined petroleum products increased most notably. The increase was slightly more substantial than in August. Manufacturers in the chemical industry (15%) and manufacturers of food products (9%) also charged much higher prices for their products than in September 2010. 

Compared to one month previously, prices rose by 0.6%. The price increase on the domestic market was less substantial than the price increase on the foreign market.

Factory gate prices
Manufacturing prices YoY (
Click to enlarge

If you look at the aforementioned chart, it seems like we are in a period of relative stabilizing that already lasts for more than a year. But sometimes it is good to look at data in its context. Luckily, the CBS offers this possibility by storing the raw data since 2000. And if you put that in a chart, you suddenly get a whole different picture (all data in the following chart, courtesy of CBS).

Manufacturing prices (2000-2011): Click to enlarge

By looking at this data, you see how strong the manufacturing prices have risen, since the trough of March 2009, caused by the economic crisis and you also see that the current price level is substantially higher than at the peak before the start of this crisis.

Taking this into consideration, I would not be surprised if we would witness another steep decline of manufacturing prices very soon. The fact that the European and Chinese economies are stalling and the fact that the US is again spending its savings, could mean the start of a crazy ride in my opinion. 

Eventually this could lead to even lower prices than in March 2009.

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