Netherlands: Consumer confidence continues to moderate at the close of the year
December 21, 2018
Consumer confidence eased for the fifth month running in December, with the confidence index dropped from 13 in November to 9 in December. However, the reading remains above the crucial zero-point mark that separates optimism from pessimism among consumers. In addition, the figure was easily above the long-term average of minus 3 over the last 20 years, and confidence has remained in optimistic territory since March 2015.
The noticeable drop reflected a broad-based deterioration in the underlying indicators, with all components registering a lower value in December compared to the prior month. Both consumers’ outlook on the economic climate and their willingness to buy moderated. Consumers were more pessimistic regarding their financial situation in the last 12 months, and less optimistic regarding the financial situation in the year ahead. Unsurprisingly then, consumers considered the current situation less suited to purchasing big-ticket items. Additionally, the economic situation in the Netherlands in both the past 12 and the next 12 months was viewed less favorably. In fact, the biggest drop in sentiment was recorded in consumers’ outlook on the economy in the year ahead. This is likely linked to lingering global uncertainties, including Brexit and trade tensions.
Consumer confidence averaged significantly lower in the final quarter of the year compared to the prior period, and this could translate into softer private consumption growth in the October-December period. Looking ahead, private consumption should nonetheless remain robust and continue supporting economic growth next year and the year after, benefitting from a tight labor market and a more expansionary fiscal policy. On the other hand, the increase to the VAT next year will offset some of the gains.
Author: Jan Lammersen, Economist