Dutch economy recovers as exports accelerate

Dutch exports are almost back to pre-recession levels. While exports are driving economic growth, weak private consumption is emerging from 13 months of contraction.
Analisis Credito y Caución
Madrid - 13-set-2010

The trend of rapidly increasing exports began late last year and has gained momentum. According to Statistics Netherlands [CBS], the value of exports rose 17% year-on-year in the first five months of the year, and the latest figures from May show growth in volume of 17% and in value of 25%: to 30 billion. As a result, Dutch exports are almost back to pre-recession levels. This surge in exports has been helped greatly by a weaker euro against the US $ and the impressive recovery of Germany, which is the biggest trading partner [25% of Dutch exports]. However, investment is still relatively low and consumption is growing only slowly.

Sectors such as commodities and oil related products, plastics, machinery, transport, chemicals, metals and the semi conductor industry are still the main beneficiaries of increased external demand. Consequently, industrial production is accelerating: manufacturing output rose 10% in April and 7% in May [year-on-year]. While outstanding production increases have been seen in May for the transport industry [31% increase] and base metal and metal products sectors [27% increase], the food industry recorded only a 2% increase.

While exports are driving economic growth, weak private consumption is gradually emerging from 13 months of contraction, and even showed growth of 1.2% in May. The unemployment figures are improving too: down from 6.1% in February to 5.6% in June.

Throughout the economic crisis, private household savings increased and have continued to do so in the first five months of 2010: by approximately 10 billion, to 294 billion, compared to 266 billion at the end of 2008 and 246 billion at the end of 2007. Crédito y Caución infer from this pattern that, as soon as consumer confidence returns and government spending is back under control, consumer spending will resume, adding to economic growth.

The flip-side of household saving is household debt and the biggest debt that Dutch citizens generally have is either the mortgage on their house or a subsequent home equity loan using the value of the house as collateral.

Although the growth level of mortgages is close to zero, the value of home equity loans continues to rise, reaching a record 610 billion by the end of Q1 of 2010 - up 35 billon from Q1 of 2009 and 56 billion from Q1 of 2008.

According to the Dutch Central Bank [DNB], business lending by Dutch banks has continued its monthly growth during 2010 after a decline in November and December 2009. The total amount outstanding rose to a new record of 338.3 billion in May 2010.

Decreasing insolvency rate in the course of 2010

After the exceptionally sharp increase in corporate insolvencies in 2009 [73.5%] and a slight increase in Q1 of 2010, the number fell in Q2. In the first six month of the year insolvencies in construction increased 28% year-on-year, while trade and industry recorded declines of 24% and 10% respectively. This development suggests that we will see a 5% year-on-year decrease this year, to around 7,500 cases. However, in the short term, Crédito y Caución expects insolvency numbers to remain close to their currently high levels.

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