Strong growth for Dutch economy in third quarter

by: Nico Klene

The Dutch economy continued to power ahead in the third quarter, considerably outpacing the eurozone as a whole.

Gross domestic product (GDP) – as provisionally estimated by Statistics Netherlands (CBS) – advanced 0.7% compared to the second quarter (qoq). Moreover, the second-quarter growth figure was revised slightly higher to 0.7% (was: 0.6%).

Stronger increase in household consumption, residential investment and exports

Most spending components increased compared to the previous quarter. Residential investment enjoyed another robust quarter (+7% qoq), even beating the already-strong second quarter. This reflects the powerful recovery in the housing market. Household consumption was also sharply higher. This is hardly surprising given the strong improvement in purchasing power this year. Business investment, however, contracted.

Exports of both goods and services were buoyant as well. Imports displayed the same pattern. Total goods and services imports, however, increased slightly less than exports.

Outlook: economic growth on track for about 2% this year

We expect the economy to maintain momentum. Although global trade growth remains a little lacklustre, there are incipient signs of things picking up. Various economic ‘barometers’ have strengthened recently – in the Netherlands too. In addition, people’s much-improved purchasing power will continue to boost household consumption. All in all, the Dutch economy seems to be heading for another quarter of decent growth. In view of the robust economic data in the previous quarters, average GDP growth will be clearly higher this year than we originally thought – possibly working out at 2% (instead of 1.5%).

Uncertainties about the global economy, political uncertainties ahead of the imminent referendum in Italy as well as elections in various eurozone countries, and the possible consequences of the Brexit decision pose risks to the Dutch economy in 2017. That said, the expected policy of the the US President-elect may well give the economy a positive impulse in the course of 2017.