Dutch GDP Ekes Out Small Second Quarter Growth

The Dutch economy continued to grow in the second quarter, albeit at a slower pace than in the first. The figures reflect weaker household spending and a jump in imports. Investment growth accelerated, primarily in the transport goods sector. The question is how sustainable strong investment growth is at the moment, as business uncertainty is high and the recent fall of the government is delaying decisions that could take away investment blockages.

So far, the trade war has not caused overall exports to suffer. Gross exports growth to the rest of the world increased from 0.2 to 0.9% in 2Q, despite higher US tariffs coming into force. The Dutch did not experience a large amount of US frontloading in 1Q, which has also muted an offsetting effect in 2Q after higher tariffs came into effect. But a strong increase in imports made the overall effect of trade on GDP negative for the quarter.

Dutch consumers continued to be in saving mode for the second quarter as high uncertainty about the economy and overall low consumer confidence is keeping household consumption muted. Despite a continued recovery of real wages, consumption fell by -0.4% compared to 1Q, spending less on leisure and clothing. The question is when confidence will return to the consumer, which is likely to translate into an acceleration of spending again. For now, expect consumption to be muted given global economic uncertainties.

For the coming quarters, we don't expect sentiment from businesses and consumers to improve dramatically. We expect a slightly accelerating growth path for the Dutch economy over the coming quarters as uncertainty eases bit by bit, which would especially improve the outlook for domestic demand.

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