Netherlands remains in recession due to spending cuts

Netherlands remains in recession due to spending cuts

The Netherlands remains in recession in the first quarter of 2012 as investment spending and consumption by Dutch households further drops.

According to the first provisional estimate of Statistics Netherlands, the Dutch economy shrank by 1.1 percent in the first quarter of 2012 compared with the same period last year. Investment and consumption in particular decreased. Exports did rise, on the other hand. Compared with the fourth quarter of 2011, the economy shrank by 0.2 percent. This means that the Netherlands was still in recession in the first quarter. The first quarter of 2012 had one working day more than the first quarter of 2011.

The 0.2 percent decrease in the economy was the third successive quarterly decrease. According to the most used definition, two or more successive quarters of decrease constitute an economic recession. In the fourth quarter of 2011 the economic decreased by 0.7 percent, in the third by 0.4 percent.

The main reason for the decrease in the first quarter is the fall in investment spending. This was 4.2 percent lower than twelve months previously. Investment in construction in particular was down, mainly because labour in this sector was down: more working hours were lost because of frost, and more of the Christmas holiday fell in January.

The further decrease in consumption by households exacerbated the economic recession. Dutch consumers spent 1.1 percent less than twelve months previously. Consumption has been decreasing since the first quarter of 2011. In the first quarter of 2012 consumers bought fewer cars in particular than in the same period last year. They also spent less on home furnishing. For the first time in a long period they did buy more food and clothes.

Government consumption was 0.3 percent lower in the first quarter than last year. Government consumption has been decreasing since the third quarter of 2011, as a result of lower numbers of government employees and teaching staff. Health care spending by the government was higher than twelve months previously.

Exports grew by 3.8 percent in the first quarter, mainly because of a strong growth of re-exports. Exports of Dutch products, which put more money in government coffers, rose only slightly: by 0.2 percent. This is a recovery after the decrease in the fourth quarter, however.

Construction output was nearly 11 percent down in the first quarter compared with the same period last year. The reason for the sharp drop was the smaller number of working hours. Manufacturing output fell slightly, just as in the fourth quarter. Mineral extraction decreased, as less natural gas was extracted than in the first quarter of 2011. Business services output was also down, mainly because fewer temp workers were employed.

In the first quarter of 2012, there were 13 thousand fewer jobs than in the same quarter last year. This is a decrease of 0.2 percent. The number of jobs in public administration fell by 17 thousand. In most other sectors, too, the number of jobs was down on twelve months previously. Jobs were only up in trade, transport, hotels and restaurants, care, and information and communication. After correction for seasonal effects, the number of jobs was 21 thousand down on the previous quarter.

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