Netherlands: Economic growth slows to over two-year low in the third quarter
Economic growth lost momentum in the third quarter according to preliminary national accounts data released by Statistics Netherlands on 14 November. In calendar-adjusted terms, the economy expanded 0.2% over the revised previous quarter (Q2: +0.7% quarter-on-quarter, previously reported: +0.8%), supported by private consumption and merchandise trade. Compared to the same quarter a year ago, economic growth slowed from 3.1% in the second quarter to 2.4% in the third quarter.
Domestic demand weakened as government expenditure growth was flat in the third quarter (Q2: +0.1% quarter-on-quarter) and fixed investment contracted markedly (Q3: -0.5% qoq; Q2: +0.7% qoq). Marcel Klok, senior economist at ING, commented that “the booming housing market failed to continue to contribute to growth” while “increasing capacity constraints […] and prices in the construction sector caused a fall in residential investment growth”. Moreover, although private consumption growth accelerated in the quarter, it remained lackluster (Q3: +0.4% qoq; Q2: +0.2% qoq) despite the unemployment rate continuing to edge down and still-elevated consumer sentiment. According to Marcel Klok, “the third-quarter figure shows that although domestic demand has been strong for a while, the Dutch economy isn’t entirely immune to the slowdown seen elsewhere”.
On the external side of the economy, merchandise exports accelerated strongly in the third quarter and offset a significant contraction in the export of services. Overall, export growth eased from 1.2% in the second quarter to 0.5% in Q3. A similar trend was visible in imports, with strong merchandise import growth amid a marked drop in services imports. All told, imports increased 0.6% in Q3, up from 0.2% in Q2.
Going forward, the Dutch economy should continue growing at a robust, albeit softer, pace in the final quarter this year and next, supported by domestic demand as a lower income tax burden and robust wage growth propel private consumption. The external sector should also continue to contribute positively to the economy next year. However, downside risks remain present in Brexit and the possible escalation of trade tensions between the U.S. and China.
A detailed national accounts breakdown will be released on 24 December.