Netherlands: Dutch economy keeps a steady pace in Q1
Economic growth was steady in the opening quarter, growing 0.5% quarter-on-quarter to match the expansion recorded in the final quarter of last year. Compared to the same period a year earlier, growth fell to 1.7%, down from the 2.2% increase clocked in the final quarter of 2018.
The first quarter’s expansion was driven by resilient domestic demand, thanks to robust albeit softer fixed investment growth (Q1: +2.1% quarter-on-quarter; Q4: +4.0% qoq) and stock building, which could be linked to Brexit uncertainty. On the other hand, household consumption came to a near standstill, growing 0.1% over the previous quarter (Q4: +0.5% qoq). This was also despite robust retail sales turnover throughout the month and the labor market tightening even further. Moreover, private consumption was capped by a notable increase in inflation and a sharp deterioration in consumer confidence; in February, consumers were pessimistic about the economy for the first time in four years. Meanwhile, government consumption was stable at 0.5% in the quarter (Q4: +0.5% qoq).
The external sector dragged on economic growth, as the rebound in exports was outpaced by a stronger swing in imports. Exports of goods and services expanded 0.8% quarter-on-quarter, contrasting the 1.6% contraction in the final quarter of last year. Imports of goods and services, meanwhile, grew 1.6% over the prior quarter and this was chiefly due to services imports, with demand for goods virtually unchanged.
Going forward, the Dutch economy should continue growing at a steady, albeit more moderate, pace this year. A tight labor market is seen supporting private consumption growth in part through wage gains. The government’s slightly more expansionary fiscal policy should further boost the economy. Downside risks remain present on the external side, however, especially concerning the trade spat between the United States and China, an uncertain Brexit and U.S.-EU trade tensions.