Dutch economy maintains solid growth pace - ING

Dimitry Fleming, Senior Economist at ING, explains that yesterday, talks to form a new coalition government broke down, but from an economic point of view, there appears no need to rush as in 1Q17, the Dutch economy was still growing at a solid pace.

Key Quotes

“After 2% or higher growth in 2015 and 2016, the economy is on track for another year of high growth. Dutch GDP rose 0.4% in 1Q17, or an annualized 1.8% QoQ. A strong rebound in investment (+5%) was the main driver. For tax reasons, businesses postponed the purchases of new (lease) cars to 2017. In 1Q, investment in vehicles surged 40%QoQ, but this increase was partly offset by higher imports (of foreign cars) and lower inventories.”

“Meanwhile, Brexit is not (yet) having a significant impact on foreign demand. Exports continue to rise strongly (+0.9%). The only pocket of weakness was household spending, which fell -0.1%. This comes, however, after a strong increase in 4Q and also seems partly weather-related. The warm winter weather led to lower spending on energy and clothing.”

“Sector-wise, the main engines of growth were commercial services and manufacturing. The increase in services was strongest in trade, transport & logistics and real estate activities. This shows that the economy is still firing on both the industrial and services engines. Because of the warm weather, the gas sector was a drag on GDP, shaving 0.3ppt off 1Q growth.”

“A separate report shows employment up 56K in the first quarter. On the year, employment showed a hefty increase of 1.9%. In hours worked, the increase was even 2.9% YoY.

Yesterday, after just over 60 days, talks between the VVD (Liberals), CDA (Christian Democrats), D66 (Democrats) and GroenLinks (Greens) to form a coalition government broke down. Today’s string of strong data shows that from an economic point of view there is little reason to rush. Government finances are looking better and better by the quarter and unemployment is dropping rapidly. After two years of above-average growth, the economy is not showing any signs of slowing its pace.”