Euro Macro: Dutch GDP showing steeper contraction in Q1
Today, the Dutch statistical office (CBS) released the second calculation of Q1 Dutch GDP figures. This showed that q/q growth in Q1 was -0.5%, as opposed to the earlier reported -0.1%.
In terms of subcomponents the difference was driven by lower government spending and lower trade volumes: both exports and imports were adjusted downward, with the higher exports change leading to a larger negative contribution to overall GDP. Next to Q1 figures earlier releases have also been adjusted.
The deviation (-0.4pp) is large by historical standards. In the last 5 years, deviations have been on average 0.1pp, including high volatility in the figures during the pandemic. What caused this? We see two reasons. First, in Q1 the model the CBS uses for seasonal correction is recalibrated. Due to this the Q1 adjustment is in our experience always relatively higher. Second, what has likely aggravated the previous point is the national accounting revision that Dutch Statistics out and published today. National accounts are revised periodically, to introduce new data sources and methods and to rebase GDP figures. It is likely that this has added to the deviation between the first and second calculation. Since all statistical offices in the eurozone will publish revisions this year – the CBS is one of the first ones – deviations between first and final figures might turn out to be a bit higher in other countries as well.
While the backward looking adjustment will negatively impact our growth forecasts (currently 0.5% for 2024 excluding today’s figures), it does not fundamentally change our view of the Dutch economy going forward. The categories responsible for the downward GDP adjustment, primarily exports, are not expected to add to growth in the near term. Indeed, the weakness in exports is caused by weakness in the Dutch and eurozone industrial sector and while we see signs of bottoming out here, a strong recovery in the short run is not expected. Instead, private consumption and to a lesser extent government spending are expected to drive growth in the coming quarters as real incomes rise on the back of lower inflation and high wage growth and the government supports purchasing power.
Overall, while we are still reviewing our forecasts, today’s realisation and revisions likely causes Dutch annual growth for 2024 to underperform the broader eurozone area as the Q1 figure of -0.5 contrasts with stronger than expected first quarter eurozone growth (0.3%).