Netherlands Private Consumption (ann. var. %)

Activity rebounds in the fourth quarter

Economic activity bounced back in Q4, increasing 0.6% on a seasonally adjusted quarter-on-quarter basis, compared with the 0.2% contraction recorded in the third quarter.

The upturn reflected improvements in private consumption, public spending, fixed investment and exports: Household spending increased 0.9% in the fourth quarter, which was above the third quarter’s 0.6% expansion; fixed investment bounced back, growing 0.5% in Q4, contrasting with the 1.4% decrease in the previous quarter; government consumption also bounced back, growing 0.4% in Q4 (Q3: -0.4% s.a. qoq).

Exports of goods and services growth accelerated to 2.4% in Q4 (Q3: +1.1% s.a. qoq). In addition, growth in imports of goods and services sped up to 2.2% in Q4 (Q3: +1.2% s.a. qoq).

On an annual basis, economic growth marginally lost steam, cooling to 3.0% in Q4, from the previous quarter’s 3.1%. Q4 marked the weakest reading since Q1 2021.

The economy is projected to contract in qoq terms in Q1 as inflation remains elevated and unemployment inches higher. That said, the energy price caps that have been in place since the start of January should offer some support to private consumption.

On the outlook, analysts at the EIU commented:

“Real GDP will grow weakly in 2023, as high commodity prices erode disposable income. Medium-term growth will be firmer once inflation falls (which will lift demand) and external conditions improve, supported by high levels of digitalisation and a fairly diverse export base. Falling house prices pose some risks, but a price crash is unlikely.”

Meanwhile, Marcel Klok from ING explains what might drive private consumption and imports going forward:

“December 2022 data shows large amounts of additional accumulated savings in consumer bank deposits, and January 2023 data shows strongly accelerating contractual wage increases. If this money is widely spent and mainly spent domestically, this might provide an upward surprise at the start of 2023. But if this is spent on later-than-usual vacations abroad, higher imports might also drag down GDP.”