Netherlands: Economic growth moderates in Q1 on weaker private consumption
May 17, 2017
The Netherlands’ economy slowed in the first quarter of 2017, on the back of weaker private consumption and a less supportive external sector. Conversely, fixed investment swung from contraction in the last quarter of 2016 to a robust expansion in Q1. GDP grew 0.4% in seasonally adjusted terms over the previous quarter, according to preliminary data released by Statistics Netherlands on 16 May, decelerating from Q4’s 0.6% expansion, but nonetheless marking the twelfth consecutive quarter of growth. The economy grew 3.4% in Q1 over the same quarter last year, which represented a significant acceleration compared to Q4’s 2.5% expansion.
The quarter-on-quarter expansion came on the back of a turnaround in fixed investment, which swung from a 1.6% qoq contraction in Q4 2016 to a strong 5.1% expansion in Q1. The solid increase in fixed investment was mainly due to a strong acceleration in construction activity, which has been stimulated by rising property prices, and benefited from upbeat business sentiment. On the downside, in Q1 private consumption swung from the 0.6% qoq growth recorded in Q4 to a slight 0.1% decline, dragged down by an unfavorable base effect. Moreover, government consumption lost steam, decelerating from a 0.6% expansion in Q4 to 0.2% growth in Q1.
On the external front, growth in exports of goods and services continued at a strong pace, recording a 0.9% expansion. The reading mirrored the result observed in Q4 and is a testament to the strength of the Dutch external sector, which is being underpinned by accelerating global and regional trade. Probably as a result of increasing fixed investment, growth in imports of goods and services sped up and recorded a 1.2% expansion in Q1, up from the 0.5% increase tallied in the previous quarter. More detailed data will be released on 23 June.
In 2017 the economy should broadly mirror last year’s performance, especially if it is able to dodge the risks stemming from Brexit negotiations. A tight labor market and rising wages will support private consumption, which will be the main driver of growth, and exports will continue to hold up well.