Dutch households purchased less in the first half of 2003 than in the first half of 2002. This is the first decrease in household consumption since the last economic decline in 1993. The fall in consumption growth displays a noticeable relation to the development in willingness to buy. The index of willingness to buy seems to be a clear predictor for the future development of consumer spending.
Consumption growth and willingness to buy
Correlation in year-on-year changes
Growth in consumption spending is related to the year-on-year changes in willingness to buy, where the latter has a lead of three to four quarters. In the graph the willingness to buy series had been moved four quarters forward.
The graph shows clearly that the peaks and troughs in consumption growth and willingness to buy generally coincide. The comparison does not always hold good, as we can see around the end of 2000 and the beginning of 2001. The turning point of the economy was still apparently unexpected.
Consumption recovers in fourth quarter
On the basis of the established correlation, household consumption is expected to recover in the fourth quarter of 2003 or the first quarter of 2004.
Bastiaan Rooijakkers and Gert Buiten