Dutch Stocks Decline After Retreat in Consumer Confidence

Dutch Stocks Decline After Retreat in Consumer Confidence

Each month, Statistics Netherlands measures consumer confidence. Consumer confidence is affected by numerous factors, like unemployment, share prices, developments on the housing market and inflation.

Many consumers are involved in share trading. This is not only because they themselves are active traders on the stock market, but they are also involved indirectly, for example through their pension funds.

The mood among consumers deteriorated substantially in August 2011. The indicator reflecting consumer confidence plummeted by 9 points to -21. The confidence setback is on a par with the recent fall in share prices. In previous years, a similar patron could be observed. When the situation on the stock market deteriorated by the end of 2000, pessimism among consumers started growing. After a record low early 2003, share prices recovered and consumer confidence increased again. By mid-2007, consumers were in high spirits. The AEX reached a record high. Shortly afterwards, in September, confidence collapsed, partly due to the outbreak of the credit crunch in the USA. Share prices also slumped. The recession lasted until early 2009 when both indicators recovered only to slump again in the summer of 2011.

One in four Dutch households own shares
The relation between share prices and consumer confidence is partly due to the direct involvement of households with the stock market. At the end of 2010, shares owned by Dutch households had an overall value approximating 224 billion euro. Investing in shares became popular among private individuals in the mid-1990’s. Previously, investing in stocks and shares had been the exclusive domain of professionals. The number of share-owning households doubled between 1995 and 2000. Private investors remained active on the stock market. Early 2010, nearly 1.7 million households – almost one in every four -owned shares.

In the consumer confidence survey, people are asked about their expectations regarding unemployment in the next twelve months. This indicator too partly depends on developments of the AEX index.. The percentage of consumers expecting future unemployment to rise increases as share prices drop. Consumers’ expectations about unemployment have deteriorated over the past few months. In August 2011, four out of every ten Dutch consumers expected a rise in unemployment.

Source: CBS

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