Netherlands: Dutch economy picks up steam in Q4 2018
A second reading of national accounts data confirmed that the Dutch economy accelerated in the final quarter of last year, growing 0.5% quarter-on-quarter (Q3: +0.2% quarter-on-quarter; previously reported: +0.1% qoq). In year-on-year terms, economic growth was revised up from 2.0% to 2.2% (Q3: +2.4% year-on-year) and, taking into account the revised national accounts data, the Dutch economy grew at a quicker pace than previously estimated in annual terms. In 2018, the economy grew 2.7% over the prior year (previously reported: +2.5% yoy), although this was still slightly down from the 2.9% expansion recorded in 2017.
The quarterly acceleration was chiefly lead by domestic demand shifting into a higher gear in the fourth quarter. Private consumption expanded 0.5% over the prior quarter, benefiting from a decrease in the rate of unemployment and stable inflation. Fixed investment rebounded strongly in Q4 after the previous quarter’s downturn: Investment grew a revised 3.7%, which is up from a markedly downwardly revised 2.4% contraction in the third quarter. Meanwhile, government consumption expanded 0.5% in the quarter, contrasting the 0.1% drop in the previous quarter.
In contrast, the more challenging trading environment dealt a blow to the external sector. Exports of goods and services fell 1.5% in the quarter, swinging from the 1.6% expansion in the previous quarter. Meanwhile, imports of goods and services dropped 1.3%, contrasting Q3’s revised 0.9% increase.
Going forward, economic growth will likely moderate although seems set to continue growing robustly nonetheless. A tight labor market supporting wage growth and thereby private consumption, combined with the government’s more expansionary fiscal policy, should support economic growth. However, risks continue to haunt the outlook, especially related to Brexit, the U.S.-China trade spat, trade tensions between the U.S. and the EU, and a possible prolonged Italian recession.