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Saturday, 17 November 2012

Dutch economy shrunk in October by 1.1% Q-o-Q and 1.6% Y-o-Y, while unemployment soared: The Netherlands pays the price for its short-sighted government policy and ‘beggar-thy-neighbour’ exports tactics

Only weeks after the start of the new Cabinet Rutte II, liberal-conservative Prime Minister Mark Rutte received about the worst data on the Dutch economy in a long time.

The Dutch Central Bureau of Statistics displayed the economic growth for 2012Q3 and the unemployment data for October 2012. Saying that the numbers were bad is a blatant understatement.

The negative economic growth was comparable to 2009Q1, when the credit crisis became fully ablaze in The Netherlands. The unemployment data showed the worst level since 2005Q1 (see the following chart).

Economic growth vs unemployment in The Netherlands 2005-2012
All data courtesy of Charts courtesy of
Click to Enlarge
With this information in mind, it is hard to believe how little vision and ideas the new government agreement displayed to spur economic growth, develop an industrial policy for the 21st century, diminish the Dutch dependence on exports and increase the lagging domestic consumption in The Netherlands.

Here are the most important snips from the CBS data:

Economy shrinks by 1.1% compared with previous quarter
Compared with same quarter last year:
• economy shrinks by 1.6%,
• exports 1.6% higher,
• household consumption 1.8% lower,
• investment 6.4% lower,
• 75,000 fewer jobs.

Economy shrinks compared with previous quarter

According to the first, provisional estimate of Statistics Netherlands, the Dutch economy shrank by 1.1% in the third quarter of 2012 compared with the second quarter. In the first two quarters of the year, the economy grew slightly, by 0.1%.

Year-on-year growth also negative again

Compared with the third quarter of 2011, the economy shrank by 1.6%.  Consumption by households and investment were down, exports still grew slightly but by less than in previous quarters. The third quarter of 2012 had one working day fewer than the third quarter of 2011.

Exports growth weakening

Exports of goods and services grew by 1.6% in the third quarter compared with the same quarter last year. In the second quarter, exports had grown by 4.4%. Exports of goods produced in the Netherlands fell by 1.7%. Re-exports, which are relatively less lucrative for the Netherlands, grew by 3.9%.

Investment substantially lower

Investment in fixed capital was 6.4% lower than one year previously. Investment spending on dwellings and commercial buildings and on civil engineering projects was down. Compared with the second quarter of this year investment in transport equipment was also significantly less. The largest decrease in investment was for cars, but spending on machines and installations also fell.

Consumption down further

Consumption by households shrank by 1.8% compared with twelve months previously. In the five preceding quarters consumption also decreased. Consumers spent less on durable goods in particular. Spending on cars was especially down on the same period last year.

Consumption by the government rose slightly, by 0.2%. This was mainly the effect of a further increase in spending on care. Spending on public administration was down again.

Construction shrinks by most

With the exception of government and care, production in all sectors of industry was lower than in the same period last year. The decrease was largest in the construction industry, at 8.0%. Construction has been declining since 2009, with the exception of a slight pick-up in 2011.

Fewer jobs again

In the third quarter of 2012 the number of jobs was 21,000 lower than in the second quarter, after adjustments for seasonal effects. Compared with the same quarter last year, the decrease was 75,000. This is a decrease of 0.9%. The number of jobs was down on last year in nearly all sectors of industry. The decrease was largest in the construction industry, 17,000. The number of jobs rose slightly in the care sector, but this increase was much smaller than in the preceding quarters.

  • Unemployment in October rose to 6.8%
  • More unemployed people over 45
  • Almost 6,000 more unemployment benefits (WW)
  • Fewer benefits terminated because of work resumption
According to the latest figures released by Statistics Netherlands, seasonally adjusted unemployment increased by 17,000 in October 2012 so that 536,000 people are now unemployed.

The latest figures released by the UWV show that there were 310,000 unemployment benefits paid (WW) in October, 6,000 more than in September.
Higher unemployment rate than in 2005

536,000 people were unemployed in October 2012. This represents 6.8% of the labour force. In September the unemployment rate stood at 6.6%. It was also high at the start of 2005, but then it never exceeded 6.6%.

More unemployed people over 45

In the last three months, unemployment rose by an average of 9,000 a month. Over half were people aged 45 to 65. The number of unemployed people over 45 reached 191,000 in October, which represents 5.8% of the labour force aged 45 to 65.

If I read the CBS statistics correctly, Dutch exports (first red and bold text) are currently losing their importance in Europe. It seems that The Netherlands is turning from an exporter that offers domestic goods, produce and services with added value into ‘the mail-man for China’. That is not an enviable position for our country.

The second red and bold text is something that worries me on a personal level, as I’m 46 years of age. Although unemployment of people above 45 is still relatively low, this number seems to be increasing above average in these statistics. That is especially worrisome, if you take in mind that we seem to be in the middle of a ‘hurricane of mass lay-offs’ all over The Netherlands and people above 45 are having a very hard time finding a new job in these trying times.

With reduced industrial production and anemic economic growth as my scenario for the next 10-15 years, most companies will choose for youngsters in the coming years; this in spite of the widely expected scarcity of qualified personnel, due to the aging process in The Netherlands.

The new government wants people to work until 67 in 2021, but yet seems utterly clueless at how to keep people above 55 at work. When the official Unemployment Benefit will indeed drop to ‘social welfare’ level after a year of unemployment, like the new cabinet wants, it could very well be that unemployed people above 55 might become the paupers of the near future.

Today, I had a discussion on Twitter with the distinguished Dutch professor in Financial Geography, Ewald Engelen, on the senseless Dutch policy of keeping wage restraint, while mostly gambling on the Dutch export and distribution power. 

We both agreed that wage restraint is 'the road to hell' for Dutch consumers and retailers and that we don't understand why government officials and representatives of important lobby groups are still in favor of it, while it really hurts the Dutch and European economy.

This policy had not only been advocated by the subsequent goverments of Jan Peter Balkenende and Mark Rutte, but also by the employer’s organizations for Small and Medium Enterprise (MKB Nederland)  and large companies (VNO/NCW).

It has dealt a heavy blow to exports and domestic production in especially the PIIGS-countries and France, but it also brought Dutch consumers to their knees.

The Dutch consumers already suffered from sky-high mortgages on their homes that have been getting more and more underwater, since 2007. The wage restraint policy, in combination with the mortgage millstone, impotent governments, eight years of austerity measures, an unsecure job-market and mounting unemployment, and last-but-not-least the endless eurocrisis, was enough to get even the worst ‘shopaholics’ running to the bank to store their savings.

Domestic consumption dropped to miserable levels and many retailers and SME-enterprises were forced to close their doors forever.

What has been the answer of the last four cabinets? Nothing… In The Netherlands, the land of the blind, the one-eyed man has been king during the last decade.

Today, PM Rutte stated that ‘he didn’t see a reason for further austerity measures yet’, according to De Telegraaf:

PM Mark Rutte sees in the disappointing figures on the Dutch economy ‘no cause for additional austerity measures’. Rutte stated this on Friday, November 17, during his weekly press conference.

Rutte stated that he didn’t use the CBS data as a guideline. Political decisions on austerity measures are based on data from the Dutch Central Planning Bureau (, as these take the effects of economic contraction on the fiscal budget into consideration, according to Rutte. “The CPB will present new data in December. That will be the time to reassess the economic situation.”

Gee, I get the unpleasant idea that we should be celebrating the fact that we won’t get additional austerity measures yet, from this clueless Prime Minister. A well-known Chinese proverb states: ‘if your only tool is a hammer, every problem soon starts to look like a nail’. Austerity and a balanced budget seems to be Rutte’s hammer… 

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