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Sunday, 27 November 2011

Macro-economic data for The Netherlands from the Dutch Central Bureau of Statistics: further decline of the economic situation seems ultimate proof of occurring recession

During the last week the Central Bureau of Statistics presented macro-economic data on: 

  • the economy as a whole; 
  • the number of hours worked in temp jobs; 
  • the household consumption; 
  • the housing prices; 
At the risk of sounding like a broken record: All data really doesn´t look good and it seems that the recession is picking up steam now. All forecasts from bank analysts and pundits that the recession will probably be over in the middle of next year seem to vanish in thin air.

Just as interesting as knowing when the 2011 recession will be over, is the question what caused the second recession in three years. The easy explanation would be that this is caused by the lacklustre, ignorant and selfish performance of the European leaders in the Euro-crisis and the enduring problems in the PIIGS countries. And it is definitely true that the Euro-soap had its influence on the economic situation.

My opinion, however, is that the current economic pain is reinforced by the circumstance that the 2008-2009 crisis was over before it really started in The Netherlands. The fact that the first crisis has ´finished´ so quickly, was mainly due to all kinds of government subsidies for companies with excess employees and emergency funds and guarantees for banks and insurance companies. The state paid for everything in 2009 and this helped the economy to recover ´for a while´, together with the circumstance that (still financially healthy) companies were hoarding employees that they actually didn´t need at the time. See: The current recession might have a much bigger impact on employment…

I said this last year when there was hardly any Euro-soap yet and I repeat it now: it is impossible that the biggest crisis since 1930 can end without real pain and bloodshed in the Dutch economy. And the same is true for the German economy and all other strong European economies. So I expect the current crisis to spread out over Europe and last for at least a few years, whether the Euro is saved or not. Although saving the euro is paramount for the European Union as a whole, it won´t help to stop this recession that needed to happen anyway.

Here are the CBS data (

Analysis November:

The economic situation at the end of November was far worse than at the end of October. This is mainly the result of declining economic growth. Almost all indicators showed further deterioration. The heart of the scatter in the Business Cycle Tracer is firmly located in the recession stage. Thirteen of the fifteen indicators are currently below the level of their long-term average.

In the course of November, new data have become available for all indicators. This has resulted in a shift in the distribution of the indicators across the quadrants. Exports and temp jobs have moved from the green to the red quadrant. Labour volume and vacancies have moved back from the yellow to the red quadrant.

The Tracer shows more serious downturns at the end of November relative to the end of October. Within the red quadrant, unemployment, capital market rate and consumption moved considerably downwards.

At the end of November, the heart of the scatter in the Tracer is located in the red quadrant (indicating recession). Twelve of the fifteen indicators are in the red quadrant, one in the yellow 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. 

Business Cycle Tracer (source:

Decline in number of hours worked in temp jobs

The amount of hours worked in stage A temp jobs was reduced by 3% in the third quarter relative to the second quarter. In the five preceding quarters, the number of hours worked in temp jobs in stage A had grown continuously. Adjusted for seasonal variation, the index figure (2005=100) for the number of hours worked in stage A was 114.6.

Stage A includes people working for temp agencies on a contract basis without regular terms of employment. In stage A, it is easier for both parties – employer and employee – to terminate the contract than in the subsequent stages B and C. The number of hours worked in stage B and C remained stable in the third quarter relative to the second quarter.

The decline in the number of hours worked in temp jobs is consistent with recent developments of other labour market indicators. Unemployment figures rose substantially, the number of job vacancies dropped marginally and the number of jobs of employees remained stable relative to the second quarter.
Hours worked in stage A temp jobs
Hours worked in temp jobs are an early indicator, as changes in the amounts are often preceding serious changes in the state of the economy. But another indicator is the amount of money paid for those hours. Normally this amount should always grow slightly due to inflation compensation. However, in a declining economy companies try to save money on temp hours by renegotiating lower hourly rates.

Therefore I took the index of temp hours worked during the last twelve years and compared this with the index of yields per hour for temp hours and the inflation rate. 

Temp hours worked vs. yields per temp hour and inflation (1999=100)
Source data:

In the chart you see that after a small decline of the worked temp hours and yields in 2003, both the worked hours and especially the yields skyrocketed until 2008. The same happened again (for a short while) since 2010, but now again the worked hours and the yields are declining and this trend will last for a few years, is my assumption. I think that the 2010 low will easily be breached and that even the 2003 low is in sight at the end of 2012.

Household consumption further in decline

Household spending on goods and services in September 2011 was 2.0% down on September 2010. In August this year, household spending was 1.0% down on one year previously. Consumption figures are adjusted for price changes and differences in the shopping-day pattern.

In September 2011, spending on goods was 4.9% below the September 2010 level. Consumer spending on durable goods was 8.5% down on September last year. A decline of this magnitude has not occurred in the past two years. Consumers spent far less on clothing, shoes and cars. Spending on home furnishing articles and consumer electronics was also lower. Spending on food, drinks and tobacco dropped by 0.3%. Due to the mild weather conditions, the consumption of natural gas dropped considerably. Spending on services improved 0.4% relative to the same month last year.

Household consumption change in % year on year

House prices drop 2.8% in October

Prices of existing owner-occupied houses were on average 2.8% lower in October 2011 than in October 2010. According to the price index of existing residential property – a joint publication by Statistics Netherlands and the Land Registry Office – the price drop is slightly less substantial than in September.

All types of dwellings were cheaper in October 2011 than in the same month last year. With 4.0%, prices for semi-detached houses declined most. Prices of flats declined the least (2.4%).

Prices rose only in Flevoland (by 1.4%). Prices dropped in all other provinces, most notably, by approximately 4%, in Friesland and Overijssel.

Prices of existing residential property units declined by 0.4% relative to September 2011. The price drop was marginally smaller than in August and September.

Nearly 9,500 existing owner-occupied houses changed hands in October, almost 5% below the level recorded in October 2010. Over the first ten months of this year, more than 98,000 houses were sold, a decline by nearly 4% from the same period last year.

Prices of existing own homes

Housing prices change in % year on year

After looking at this data, I say the Dutch cabinet of Mark Rutte: wake up and understand that this housing market won’t heal until the prices are more in synch with the income of people. Help people to bring down their mortgage debt.

1 comment:

  1. Well finally, a realistic view from Europe of the unfolding disaster. If two of the strongest economies - Holland and Germany will be hit - imagine how much more the PIIGS will suffer. One only has to read this article, and its clear Greece is already deep into a full-scale Depression - And, if the Eurozone breaks apart and especially if it is disorderly, it will produce a financial freeze-up of "Lehmanesque" proportions, maybe worse. Unfortunately, Wolfgang Munchau has an article on FT predicting its over within 10 days; although, I also read that the IMF is preparing a major rescue package.