Dutch economy shatters expectations in volatility ridden figures
Dutch economy grew by 1% qoq – The Dutch economy shattered consensus and our expectations (+0.2 qoq) for second quarter GDP growth. The Dutch economy grew by 1% qoq, driven by increasing exports and to a lesser extent government consumption. This followed a -0.3% qoq contraction in Q1. Quarterly figures have been characterized by high volatility: first quarter GDP initially was -0.1% qoq, subsequently was revised down to -0.5% qoq and was revised up again today to -0.3%. All of these adjustments are higher than the average adjustments seen in the past five years.
Looking beyond the quarters, the Dutch economy grew moderately in the first half of this year (+0.7% compared to 23Q4). This is consistent with our view of below trend growth for 2024 as a whole given the macro environment of weak external demand – particularly from main trading partner Germany (GDP: -0.1% qoq) – interest rates still at restrictive levels and domestic capacity constraints such as the labour market and the electricity grid which still hamper activity. In quarterly terms, we continue to expect low but positive quarter-on-quarter growth in the second half of 2024.
Exports retrace Q1 losses and drive growth while private consumption disappoints
To some extent, Q2 mirrored Q1 growth, with net exports contributing 0.8 pp to GDP growth in Q2 after a decline in Q1 (-0.7%) and private consumption declining after the strong expansion in Q1. The quarterly expansion in exports was mostly driven by the export-oriented Dutch industrial sector, which regained some footing after the weak first quarter. Still, on balance, the volume of exports remained unchanged in H1 2024 and looking at the industrial sentiment in the broader eurozone the outlook for the Dutch industrial sector remains weak. Private consumption surprisingly declined (-1% qoq). We anticipated private consumption to expand on the back of easing inflation and wage rises but Dutch households seem reluctant to spend real wage gains and favour saving at the moment. Additionally, bad weather over Q2 has dampened services spending in the country. Finally, the government contributed positively to growth via higher spending on refugee shelter and healthcare, while investments in housing and vehicles increased on a quarterly basis.
The Dutch labour market remains tight but the peak is behind us
Quarterly labour market figures released today were in line with our view that the Dutch labour market remained tight in Q2 but a drop in job openings alleviated some pressure. As a result the ratio of job openings per unemployed persons dropped from 1.10 to 1.08. Looking ahead, the Dutch labour market remains tight in a historical perspective, as labour demand remains high.
We are currently revising our forecasts, which will be published in the upcoming Global Monthly.