Dutch economy “deteriorating” again, but could pick up by July

The Dutch economic picture is “deteriorating” again, Statistics Netherlands (CBS) reported on Thursday. Eleven of the 13 economic indicators on the statistics offices’ business cycle tool were more negative in February than their long-term trend. ABN Amro expects the economy to pick up this year, especially if interest rates start falling from June, as the bank forecasts.

According to CBS, consumer and producer confidence was slightly less negative in February, though they’re still under the long-term average of the past two decades. Household consumption increased by 0.3 percent in December compared to the same month a year earlier. But everything else looked more pessimistic.

Investments (-8.1 percent) and exports (-1.6 percent) declined in December compared to a year ago. Production was 3.3 percent lower, there were fewer vacancies and worked hours, and unemployment increased.

Based on the current data, CBS did note that the Dutch economy grew (+0.3 percent) in the last quarter of 2023 after three quarters of contraction, officially ending the slight recession the Netherlands was in.

ABN Amro expects that growth to continue this year. The bank predicts economic growth of 0.7 percent for 2024, largely thanks to consumers spending more, as CBS’s business cycle tool indicates. Inflation is rising less rapidly, wage growth remains high, and the government is still supporting households’ purchasing power. So consumers will have more to spend this year.

The bank noted that low-income households will see the smallest purchasing power improvement this year (+2.1 percent). People with mid-level incomes will see their purchasing power climb 3 percent this year, and high-income households can expect a 2.3 percent increase.

Inflation is falling in the Netherlands and in the rest of the eurozone, so ABN Amro expects the European Central Bank to decrease interest rates again in June. Interest rates have been at 4 percent for some time. The bank expects the ECB to lower them by 0.25 percent at each policy meeting from June, down to 1.5 percent next year. The lower interest rates will positively affect the economy, but that will likely only be visible towards the end of the year, ABN Amro said.