Netherlands: Economic growth continues to outperform Euro area average in Q3
November 14, 2019
A preliminary reading of national accounts data showed that the economy expanded 0.4% quarter-on-quarter in the third quarter, matching the result recorded in the prior quarter and double the Euro area average. Robust private and public expenditure and a positive contribution from the external sector led the expansion. Meanwhile, on an annual basis, economic growth accelerated slightly from 1.8% in Q2 to 1.9% in Q3.
Public and private consumption supported the quarterly expansion. Household expenditure rose 0.2% quarter-on-quarter over the prior quarter, buttressed by improved consumer sentiment and a tight labor market, which is feeding through to wages. Although this was down notably from the 0.8% expansion logged in the second quarter, the Q2 reading was the highest reading since the first quarter of last year and thus proved an unsupportive base effect. Government consumption, meanwhile, rose 0.5%, which was up from the 0.1% increase in the prior quarter. Fixed investment, however, dragged on domestic demand as it contracted 0.2%, swinging from the 0.9% expansion in the second quarter.
On the external front, net exports contributed to economic growth once again. Exports of goods and services rose 1.1% quarter-on-quarter (Q2: +1.2% quarter-on-quarter) on the back of strengthening goods exports, while the export of services moderated. Imports, meanwhile, rose 1.2% in the third quarter, up from the 1.0% increase recorded in the second.
Turning to next year, economic growth is expected to lose some steam from this year’s solid expansion. Softening domestic demand, mainly due to weaker fixed investment growth, is projected to weigh on the economy; private consumption growth, however, is seen accelerating slightly, partly thanks to the government’s fiscal expansion. External headwinds also continue to linger, particularly related to Brexit and the Sino-American trade war. That said, as highlighted by Marcel Klok, senior economist at ING: “We’ve had reasons to be more optimistic in the last few weeks. While nothing is a done deal yet, President Trump said that a mini deal between the US and China was something that “could happen soon” and the risk of a ‘no deal’ Brexit has come down quite a bit. For Europe, including Dutch suppliers to the German car industry, it’s encouraging to hear the US Commerce Secretary say that tariff hikes on European car imports can be avoided.”
Author: Jan Lammersen, Economist