Domestic Demand in Netherlands

Netherlands - Domestic Demand

Economic growth in Q2 revised slightly downwards

A second reading of national accounts data saw growth in the second quarter revised slightly downwards from 0.5% quarter-on-quarter to 0.4% quarter-on-quarter, matching the revised 0.4% expansion in the prior quarter. The revision to the second quarter’s growth rate reflected a softer contribution from the external sector than previously estimated. Meanwhile, the Dutch economy grew a revised 1.8% year-on-year (previously reported: +2.0% year-on-year), up from the first quarter’s 1.7%.

Domestic demand remained in the driver’s seat in the second quarter. Household consumption growth quadrupled to 0.8% (Q1: +0.2% quarter-on-quarter), supported by continued tightness in the labor market and a recovery in consumer sentiment, offsetting elevated inflationary pressures. Moreover, despite more than halving, growth in fixed investment continued supporting the economy (Q2: +1.2% qoq; Q1: +2.7% qoq). On the other hand, public expenditure growth almost ground to a halt (Q2: +0.1 qoq; Q1: +0.4% qoq).

Exports of goods and services, meanwhile, rose 1.2% in the second quarter over the prior quarter, double the first quarter’s 0.6% expansion. Both goods and services exports picked up pace. In contrast, imports growth decelerated from 1.7% in the first quarter to 1.0% in the second. This was solely due to weakening goods import growth; conversely, imports of services grew at a quicker pace.

Despite the downward revision to growth in the second quarter, the Dutch economy grew at twice the speed of the Euro area. Looking ahead, economic growth is expected to remain solid this year although lingering downside risks are seen weighing on the economy somewhat. Next year, while the economy is expected to decelerate further amid mounting headwinds, the recently announced government budget should cushion the slowdown somewhat and domestic demand is expected to remain robust.

FocusEconomics Consensus Forecast panelists see GDP growing at a softer pace of 1.7% in 2019, which is up 0.1 percentage points from last month’s projection. For 2020, the panel expects the economy to expand 1.4%, down 0.1 percentage points from last month.