Dutch economy benefiting from international recovery
The upward revision of the third-quarter GDP figures supports our expectation that the economy starts growing again in 2014. The Netherlands is benefiting from the improved international environment, which is translating into stronger growth in global trade. The brightening prospects for business and industry are reflected in the pick-up in orders. The Dutch manufacturing PMI is currently the highest within the eurozone, while in other sectors, too, entrepreneurs are less pessimistic about the future. In line with the improvement in producer confidence, businesses are cautiously considering new investments. Even the construction sector witnessed an increase in investment activity in October. Nevertheless, the overall prospects for that sector are still far from rosy. Although unemployment will not decline for some time to come, consumer confidence has firmed considerably in recent months. However, households are still keeping a tight rein on spending, with most still saying that they have no plans to make any ‘big ticket’ purchases in the near future. The decline in real disposable incomes over the past few years and negative home equity have combined to put a damper on spending. All in all, the economic recovery remains too weak for any substantial improvement in public finances, while structural reforms remain essential if confidence is to be restored. Against this background, the government’s eleventh-hour success in reaching both Housing and Pension Accords is encouraging. The year 2014 is clearly off to a more auspicious start than 2013.