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Wednesday, 16 November 2011

The latest macro-data from the Central Bureau of Statistics: the traffic-lights for economic growth seem to be turning red.

The Dutch Central Bureau of Statistics ( presented yesterday some important macro-data on the Dutch economy. Conclusion: the recession in The Netherlands seems well on its way

Here are the most important parts from the macro-data. All figures and charts courtesy of CBS.

  • Year-on-year economic growth 1.1% in third quarter
  • Quarter-on-quarter contraction of 0.3%
  • Household and government consumption both down 
  • Job growth stagnating

According to Statistics Netherlands’ first provisional estimate, the Dutch economy grew by 1.1% in the third quarter of 2011 compared with same quarter last year. Compared with the second quarter, the economy shrank by 0.3%. This is the first time since the second quarter of 2009 that quarter-on-quarter growth was negative. The number of jobs of employees was 33,000 up on twelve months previously.

Household consumption down
Households spent just over 1% less in the third quarter of 2011 than in the same period last year. Purchases of new cars, in particular, dropped sharply. Spending on clothes and shoes was also down. Consumers also spent less in hotels and restaurants, partly because of the poor weather in July and August.

Government spending on general administration and defence fell substantially as a result as general cost-saving measures and fewer jobs. Government spending on care did continue to rise. Net consumption by government was slightly lower compared with the third quarter last year.

Investment spending up
Investment spending was 4.6% higher than twelve months previously. This increase is comparable with that in the second quarter. Investment in cars and machines in particular was up. Investment in dwellings, company premises and civil engineering works grew by 2.6%. This is a smaller increase than in preceding quarters.

Hardly any growth in business services
The slight recovery in business services did not continue in the third quarter. Compared with twelve months previously, growth was very modest. Business consultants, engineers, architects and real estate agents all showed negative growth. Temp agencies did grow slightly.

The increase in total manufacturing output was modest in the third quarter. Construction output also only grew slightly.

Jobs growth stagnating
There were 33,000 employee jobs more in the third quarter of 2011 than in the same quarter of 2010. This is an increase of 0.4%. Jobs growth was largest in trade, transport, and hotels and restaurants, at 31,000 jobs. In the care and business sectors, too, the number of jobs grew strongly. Compared with one year previously, the decrease in the number of jobs was largest in the government sector, 15,000, followed by manufacturing and construction.

After correction for seasonal effects, the number of jobs in the third quarter was almost the same as in the second quarter of 2011.

Although you can’t say that the data on the Dutch economy are really bad, the quarter-on-quarter trend is worrisome and will be worse for Q4, is my conviction.

One positive point is the decline in government spending. The rise in government healthcare spending, however, does in my opinion not only point to the aging process in The Netherlands, where people get older and need more healthcare; the reason most stated by politics.

It might also point out that the relatively new, commercialized healthcare insurance system (since 2005) and the very complex and fraud-sensitive methods of calculating fees for medical treatments and hospital care are turning into a giant money pit for the Dutch government and (thus) its citizens. These pay much higher costs ( €600 or more in extra premium and expenses per year for a four person family) in exchange for much less healthcare.

Also the exports growth – paramount for the Dutch economy – is more and more declining:

The volume of exports of goods increased by more than 1% in September from twelve months previously. In July, the growth rate still was nearly 5%, in August more than 3%. The volume of imports was 4% higher in September. Volume figures have been adjusted for the number of working days.

According to November’s Exports Radar, circumstances for Dutch exports have worsened. Export conditions have deteriorated for more than six months now. Nevertheless, conditions for Dutch exports are still more favourable in November than they were on average over the past two decades.

The value of exported goods totalled 34.9 billion euro, i.e. nearly 7% up on one year previously. The value of imports grew by nearly 12% to 31.3 billion euro, resulting in a 3.6 billion euro trade surplus, which is 1.1 billion euro below the September 2010 level.
The value of imports and exports of raw materials and mineral fuels grew substantially compared to September 2010. Higher oil prices played an important part in this respect.

Trade with EU countries was more dynamic than trade with non-EU countries. The value of exports to non-EU countries was in fact marginally below the level of one year previously.

Export and import prices were respectively 5.3 and 7.3% up on twelve months previously. As a result, terms of trade deteriorated compared to September 2010.

Exports of goods (volume adjusted for working days)

The red-printed text points to a potential problem: when the crisis in the Euro-zone will be accelerating, the consequences for Dutch exports could be grave, as the non-EU exports would not compensate the declining EU exports. 

It would be better news if the Dutch economy was not so dependent on exports to the other Euro-countries (especially the PIIGS).

That there is still little growth in autonomous consumption in The Netherlands, is proven by the retail data.

  • Prices up, volume down 
  • Sales non-food sector have downward effect on retail turnover 
  • Turnover non-food sector substantially down in September

In the third quarter of 2011, retail turnover grew by 0.3% relative to the same period last year. Retail prices were 2.9% higher, volume declined by 2.6%.

According to the latest figures released by the CBS, non-food shops pushed down sales and volume in the retail sector.

Non-food shop sales dropped by approximately 2%. Higher prices did not entirely compensate for the volume decline by nearly 4%. Turnover declined in nearly all branches of the non-food sector. Clothes shops and consumer electronics shops had to cope with loss of turnover.

Turnover generated by food, drinks and tobacco shops was nearly 2% higher than in the same quarter last year, entirely due to higher prices. Volume contracted marginally. Supermarkets realised a higher turnover, but specialist shops performed less well than in the same quarter last year.

Mail order firms and online shops realised a turnover growth by nearly 6%, petrol stations achieved a turnover growth by more than 5%.

Sales were down in most branches of the retail sector. The loss is almost entirely due to non-food shops. Altogether, non-food turnover dropped by nearly 6% in September, volume shrank by more than 7%. Clothes shops, consumer electronics shops and textile supermarkets recorded considerable turnover losses.

It says enough about the Dutch economy that retail sales do only rise due to higher prices and never due to autonomous growth of sales. A result of these higher prices will be that people are even more reluctant to spend their money in the food and non-food retail business, especially as the economic decline is gaining steam in The Netherlands.

The traffic-lights for economic growth in The Netherlands might not be red yet, but the color orange is starting to look very ‘reddish’ indeed.

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