Netherlands: Economic growth stronger than initially expected in Q3
December 24, 2021
The Dutch economy expanded 2.1% in seasonally-adjusted quarter-on-quarter terms in the third quarter. This was up from the preliminary estimate of 1.9% growth released on 16 November, but down from the second quarter’s 3.8% expansion. On an annual basis, the economy grew 5.2% in Q3, up from the first estimate of a 5.0% expansion, but still markedly down from the 10.4% increase recorded in the second quarter.
The improved quarterly reading came on the back of stronger-than-initially-estimated consumption. Household spending increased 4.5% over the prior quarter in Q3 (previously reported: +3.8% qoq), but still slowed from the 6.4% increase recorded in Q2. Similarly, public consumption increased 1.5% over the prior quarter (previously reported: +0.7% qoq), but still eased from the 3.9% rise logged in the second quarter. Furthermore, fixed investment contracted at a softer pace than initially estimated, dropping 2.3% over the prior quarter (previously reported: -2.7% qoq). That said, this was down from the 1.6% decrease logged in the second quarter. This mainly reflected a stronger decrease in fixed investment in the private sector, as government investment fell at a slower pace.
The contribution of the external sector was smaller than previously estimated, as imports of goods and services grew at a markedly quicker pace. Imports expanded 3.1% quarter-on-quarter in the third quarter (previously reported: +1.6% qoq) on the back of surging services imports, picking up pace from the second quarter’s 2.7% expansion. Exports of goods and services, meanwhile, increased 2.2% in the period. While this was up from the preliminary estimate of 1.3% growth, the reading was still notably below the second quarter’s 4.2% expansion.
Activity in the final quarter of 2021 will have likely taken a hit from the reinstatement of restrictive measures from 13 November onwards, which were tightened further in mid-December when all non-essential stores and services were closed. The restrictions will remain in place at least until mid-January, denting economic activity at the outset of the new year and weighing on the near-term outlook. However, a tight labor market and the eventual removal of restrictions should buoy household consumption, while the new coalition is set to become less frugal, which bodes well for public consumption growth. That said, the rollback of fiscal support measures and an overheating housing market cloud the outlook.
Author: Jan Lammersen, Economist