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Dutch consumers gloomier than ever as joblessness climbs and house prices dive
February 21, 2013 / 10:57 AM / 5 years ago

Dutch consumers gloomier than ever as joblessness climbs and house prices dive

AMSTERDAM (Reuters) - The shrinking Dutch economy showed signs of sharp deterioration on Thursday with a ream of data that could make it harder to meet its deficit target and keep its top notch triple-A credit rating.

A woman looks at a fashion design of Roswitha van Rijn in one of the former prostitution establishments which temporarily are available for sixteen fashion designers from Amsterdam January 19, 2008. REUTERS/Paul Vreeker

Consumer confidence fell to its lowest since records began, unemployment reached the highest level in around 16 years, and house prices showed the strongest annual drop since 1995, the country’s statistics office said.

The export-oriented Netherlands, the euro zone’s fifth-largest economy, is in its third recession since 2009, and wants to bring the deficit below the European Union target of 3 percent of economic output this year.

Rating agency Fitch cut its outlook on the Netherlands’ AAA credit rating to negative earlier this month, citing worries about falling house prices, the banking system and the high state debt burden.

Consumer confidence fell to minus 44 points in February from minus 35 in January, reaching the lowest point since records started in 1986, Statistics Netherlands said in a statement.

Seasonally adjusted unemployment rose to 7.5 percent in January, or almost 600,000 of the labour population, from 7.2 percent in December, the statistics office said.

Prices of existing homes, meanwhile, fell almost 10 percent in January compared with a year earlier, the biggest year-on-year drop since records started in 1995.

“The short-term prospects are not rosy. It is a bitter pill for people who lose their jobs or have finished their education, and can’t find work,” Deputy Prime Minister Lodewijk Asscher said in a statement.

“There is, however, no simple solution to solve this problem in the short term. Therefore we have to continue investing in education, innovation, and contain the crisis in Europe.”

Considered part of the euro zone’s core, the Netherlands is suffering from a building slump, falling consumer spending and investments, and is under a government austerity programme.


Prime Minister Mark Rutte has pledged to bring the budget deficit below 3 percent but official forecasts in December suggest this will be difficult without further austerity.

The central bank expects a deficit of 3.5 percent of gross domestic product this year, while cabinet forecaster CPB expects 3.3 percent in 2013, down from 3.8 percent in 2012.

“The thing about the Dutch is that as regards the budget deficit, past experience suggests they will do whatever it takes to meet the rules,” Rabobank economist Lyn Graham-Taylor said.

“The Dutch consumer has been hit by pension cuts, by the housing market. But it doesn’t immediately increase the chance of a ratings downgrade. This is poor economic data but it would take a while to feed into any ratings actions,” he said.

Both Rutte and Finance Minister Jeroen Dijsselbloem have said previously that they would wait for new forecasts from cabinet forecaster CPB before considering further austerity measures. CPB will publish preliminary numbers on February 28.

Dijsselbloem, who became head of the Eurogroup of euro zone finance ministers last month, has repeatedly said in the past few months that European rules allow for leniency in reaching deficit targets in difficult economic conditions.

The Dutch economy contracted 0.2 percent quarter-on-quarter in last quarter of 2012, after a 1 percent shrinkage in the preceding period.

Dutch consumer spending in the fourth quarter fell 2.3 percent from a year ago, reflecting a slumping property market, job losses, pension cuts and tax hikes.

House prices are down 19 percent since peaking in 2008, and Fitch expects the decline to reach 25 percent. Some pension funds have already reduced pay-outs due to funding shortages, and another 68 will cut from April 1 by as much as 7 percent, the central bank said on Tuesday.

Bankruptcies also hit a record 11,235 last year, the statistics office said last month, up 18 percent from 2011 with construction and trade companies accounting for the highest number if personal and individual businesses are excluded.

Reporting by Gilbert Kreijger; Editing by Sara Webb and Jeremy Gaunt.

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