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Friday, 16 August 2013

The CPB outlook and the CBS economic data turned 14 August into ‘Worrisome Wednesday” for the cabinet of PM Mark Rutte

I got it bad. You don’t know how bad I got it.
You got it easy, you don’t know when you’ve got it good
It's getting harder Just keeping life and soul together
I'm sick of fighting Even though I know I should…

You could safely state that Dutch PM Mark Rutte didn’t have the best week of his Prime Minister-ship in The Netherlands this week. In the first week after the summer recess of Dutch parliament ended, there were some events that probably even would have caused the great Winston Churchill a migraine headache.

On Monday morning, 12 August 2013, prince Johan Friso of Orange passed away, after being in a deep coma for 1,5 years, caused by a fatal skiing accident.

It became clear that this Friday’s ‘semi-royal’ funeral (officially, Friso was not a member of the House of Orange anymore and therefore not a possible successor for the Dutch throne) would be very private: so private indeed that neither Mark Rutte, nor any other representative of his cabinet had been invited to it.

However, the double whammy came last Wednesday: first, the Dutch Central Bureau of Statistics presented some really disappointing macro-economic data and afterwards the Central Planning Bureau presented its notorious outlook for the remainder of 2013 and 2014.

In my article upon the CPB outlook, I promised already to get back to the CBS economic data. Here are the pertinent snips from Wednesday’s three press releases by the CBS, combined with my comments:

According to the first estimate conducted by Statistics Netherlands, the Dutch economy shrank 0.2% in the second quarter of 2013 compared to the first quarter. This is the fourth quarter in a row showing economic decline, although with each quarter the decline became less severe. The economy contracted 1.8% relative to the second quarter of 2012. The second quarter of this year had the same amount of working days as the second quarter of 2012.

In the second quarter, household consumption on goods and services was 2.4% below the level of one year previously. Household consumption has been in a downward spiral for more than two years now. Dutch consumers spend less money on durable goods like cars, clothes and furniture, but also cut down on food, drinks and tobacco. Consumers spent more on natural gas than last year due to the relatively cold weather conditions in spring.

Government consumption fell by 0.5% as a result of a spending cut on public administration Government spending on care was higher than last year

Fixed capital formation in the second quarter was 9.4% below the level of one year previously. This is the sixth consecutive quarter showing a downward trend, although the decline is smaller than in the first quarter. In the construction sector, investments were still declining, but less rapidly. The same applies to investments in machinery and computers. Car sales were dramatically down, partly because last year more cars were sold as companies anticipated the introduction of the higher tax rate on passenger cars and motorcycles (BPM), effective from 1 July 2012.
Exports of goods and services decreased by 0.3% in the second quarter relative to twelve months previously. Exports of petroleum derivatives dropped dramatically, whereas last year the foreign demand for these products was exceptionally high. Imports were 1.7% below the level of one year previously.

Exports of goods manufactured in the Netherlands fell significantly in the second quarter compared to the first quarter; the growth of re-exports was smaller than in the preceding quarter.

Output slumps in sectors construction and manufacturing industry
Although most sectors still faced output decline, the decline was less substantial in many sectors. Just as in the first quarter, the sectors care and mineral extraction realised growth.

Output generated by the construction sector was 5.9% down from one year previously. Manufacturing output was 1.7% down, but with 8.6 and 4.5% respectively,  the corresponding figures for the preceding quarter were more unfavourable. Output realised by the sector commercial services also declined less rapidly than in the first quarter. Output by the sector mineral extraction grew 7.5% due to higher domestic and foreign natural gas consumption. The growth was smaller than in the first quarter.

Adjusted for seasonal variation, there were 91,000 unfilled vacancies at the end of June, a reduction by 6,000 relative to the first quarter, which means that the downward trend continues. According to the most recent figures released by Statistics Netherlands, the number of vacancies has reached the lowest level of the past decade.

The private sector entirely accounts for the decrease in the number of vacancies. In the public sector, the number of vacancies has in fact grown. The most dramatic decline occurred in the sector commercial services; the number of vacancies fell by 3,000 to 56,000.

According to the most recent figures released by Statistics Netherlands, unemployment adjusted for seasonal variation grew by 19,000 in July to reach 694,000.
Figures published by the Institute for Implementation of Employees’ Insurances (UWV) show that the number of unemployment (WW) benefits has grown by 13,000 to 395,000.

The number of unemployed increased by 19,000 in July. The increase is more substantial than in the preceding three months. The unemployment rate in July was 8.7%. Youth unemployment was 17% and the unemployment rates among 25 to 44-year-olds and over-45s were 7.9 and 7.5 % respectively.

Unemployment has risen on a monthly basis since July 2011. The average monthly increase over the past twenty-four months was 12,000. Men in the age category 25-64 accounted for nearly half of the increase. In particular over the past twelve months, unemployment has soared: by more than 180,000 versus nearly 100,000 in the previous twelve months. The main reason is that more people than before became unemployed because they lost their jobs. According to the ILO (International Labour Organisation) definition, 7.0% in the Dutch labour force were unemployed in July versus 6.8% in June.

What you could state about these economic data are the following remarks:

  • The Dutch unemployment situation is getting from bad to worse. The Part-time Unemployment Benefit (see for an explanation this article) in 2009 and 2010, which had been meant as a means to stop unemployment growth as a consequence of the crisis, indeed only postponed the inevitable.
    • Since the start of 2013 unemployment is really skyrocketing, just like the number of small and large companies and private persons that have defaulted.
  • Slowly, but surely the economic data seems to improve slightly, when compared to the previous quarter. However, when compared y-o-y, the economic data is still very bad.
    • With these economic data, The Netherlands is among the weakest countries in Europe, when it comes to economic growth and returning prosperity; it resides in the company of Greece and Ireland. The EU as a whole is slowly getting out of the recession, with France and Germany as the current heroes of growth. The Netherlands is still firmly IN recession.
  • However, there is a positive aspect to these data. I see the current crisis as a cleansing process: a process, which had to be carried out in order to get rid of overcrediting, overproduction, excess private debt and excess consumption in The Netherlands. From that point of view, you could say that The Netherlands since 2011 is well on its way to be cleansed indeed.
    • The first three years of the crisis had been merely used by the successive Dutch cabinets to kick the can down the road and postpone all the difficult decisions, concerning: 
      • unemployment; 
      • industries with a troubled future (a.o. agriculture, building and construction, healthcare, financial services and business services); 
      • and last, but not least, the Dutch housing market.
    • Now the cleansing process is underway anyway, in spite of the weak and indecisive cabinets that led The Netherlands during these years. Eventually, The Netherlands will become a stronger country from it.

Nevertheless, I don’t expect something good to come out of this hopelessly weak Cabinet Rutte II in the coming months or years.

The cabinet sticks to mindless austerity measures and tax increases for the middle class, which ‘annihilate’ consumption and put the economy further in decline. At the same time, the cabinet expects ‘the market’ to have a magic wand, which magically solves all financial and economic problems in The Netherlands. Of course the market … does not!

There is no ‘grand vision’ in this Cabinet:
  • No industrial policy for the manufacturing industry, which should aim at bringing back The Netherlands among the leading industrial nations in Europe and the world;
  • No grand scheme for children’s education or for lower and higher professional education and scientific education. In the vision of the cabinet schools should do more with less money, but they end up doing much less with less money. At the same time too little has been done about the excess salaries for executive managers in the large school conglomerates;
  • There is no real debate upon healthcare and the aging process in The Netherlands. The only formulas of this cabinet are: sobering up the conditions and granted treatments within the mandatory health insurance  policy and again trying to do more with less money, which fails hopelessly;
  • No strategy for the future to clean up the excess capacity in the building and construction industry or rejuvenate the Dutch housing market by taking the hard decisions (abolishing the Mortgage Interest Deductability for instance) and the pain right now;
  • No thorough ideas and strategies concerning the globalization and the effects of this towards employment and employability in The Netherlands;
  • No new concepts towards renewable energy and ways to stop global heating. Concerning renewable and environmentally-friendly energy, The Netherlands is again among the weakest countries in Europe.
    • The renewable energy targets for The Netherlands in 2020 will be missed by a lightyear;
    • There is a deafening silence on almost any aspect of the big energy questions for the future, in spite of the fact that one of the architects of this Cabinet, Diederik Samsom, has been a prominent member of Greenpeace. 

These are no ideas and concepts that could immediately solve the economic depression in The Netherlands. Unfortunately, we have to sit that one out.

Nevertheless, the aforementioned issues and concepts could be like seeds, that would bring prosperity and rejuvenation to The Netherlands in the long run. 

As there is a future after the depression: a future for which this cabinet is not ready by far…


  1. Hi Ernst,

    I think this is an good analysis of the state of the Dutch economy.
    In my view we could characterise it by stating that the Rutte-government is only 'watching the shop'. Very little creativity and a general lack of vision. One great big disappointment.

    It is only because business is trying hard to deal with this mess that NL is only seeing 0,2% shrinkage.

    We will have municipal elections in march 2014,
    I expect to see a wave of new layoffs in the public sector after(!)those elections. Until march 2014 they will keep on muddling through just to ensure they won't lose to much votes (specially PvdA).

    Time for new general elections and a new government, hopefully by the new generation of 30-somethings political elite.
    New idea's and a new vision are needed.

  2. Thanx for your wonderful comments. I agree with everything you said and I'm unfortunately also convinced that 'the worst has yet to come'.

  3. Dear Ernst,
    Thanks for sharing! I'm sure lots a xpats looking for work elsewhere. I never thought the Netherlands will be so bad a small old rich country and brought down by a Peter Pan goverment shame on them to please Brussel.