Netherlands in a "mild" economic recession: ING economist

The Netherlands is in a mild economic recession, according to ING chief economist Marieke Blom. Companies like Philips and Aldel are announcing layoffs, unemployment is rising for the first time in two years, and consumers’ and producers’ confidence is plummeting. “I think we have passed the tipping point and are in a mild recession,” Blom said to Nieuwsuur.

Several economic indicators are in the red, Blom explained. “The first thing we look at is what consumers are doing right now,” she said. ING checks debit card transactions to see how consumer spending is developing.

In the second quarter, spending was up following the first quarter’s coronavirus lockdown. “But in the third quarter, we see that consumer spending is somewhat lower again.” Based on lower amounts spent and the increase in prices, Blom estimates that consumer spending dropped about 1.5 percent in the third quarter. “Normally, as economists, we already fall out of our chairs if there is a 1 percent change in a quarter,” Blom said. “This means a significant change in economic conditions for us.”

Consumer confidence is also plummeting. “It’s really at an all-time low now. It’s never been this low. This is about the question: are you willing to buy or sell something? People are now saying: I can’t afford to because everything is getting more expensive, and my income is not increasing proportionally.”

Another indicator is how businesses are doing. “We ask companies how many orders they have received in the past few months,” Blom said. Along with consumer spending, companies reported that orders increased in the second quarter but decreased in the third. “If we look a little closer at the data, we see that the companies that are struggling are mainly manufacturing companies, which need a lot of energy.”

Blom describes the recession as “mild” because some indicators are also doing well. “For example, employment is still at a high level. But the future is very uncertain: it has to do with, for example, what kind of winter we’ll have and whether the gas will become even more expensive,” Blom said. “We don’t really know whether it will develop further into a strong recession.”