Economic growth in the third quarter of 2005 higher than previously estimated

21/12/2005 09:30

The growth rate of the Dutch economy was 1.3 percent in the third quarter of 2005, according to the second estimate of the quarterly accounts by Statistics Netherlands. The growth of the gross domestic product (GDP) turned out to be 0.4 percent point higher than in the first estimate of 15 November.

GDP growth in the third quarter was mainly due to exports and recovering investments. Households and government consumption were also higher than in the third quarter of 2004.

Upward adjustment of government consumption

The 0.4 percent point adjustment of Dutch economic growth is mainly due to an upward adjustment of government consumption. Government and care expenditure were both higher than previously estimated. Furthermore investments, and to a lesser degree exports and household consumption are higher than in the first estimate. On the other hand, the imports increased.

From the production perspective, commercial services produced more than previously estimated. The production by the producers of goods, however, was slightly lower.

Quarter-on-quarter growth rate at 0.6 percent

The volume of GDP in the third quarter of 2005, adjusted for seasonal and calendar effects, increased by 0.6 percent on the second quarter of 2005. This is an increase of 0.3 percent point on the first estimate. The quarter-on-quarter growth rate of 0.6 percent is above the average of the previously four quarters.

Exports growing mainly through re-exports

The volume of the exports of goods and services in the third quarter was 5.0 percent higher than in the third quarter of 2004. The exports rose just a fraction less than during the first six months. Growth is almost entirely due to re-exports. Re-exports are exports of goods produced elsewhere, for instance in China, the USA and Taiwan. These are distributed via the Netherlands after having undergone a very limited, if any, amount of processing. The growth of the exports of goods produced in the Netherlands was very modest and clearly much less than in the first six months.

The growth rate of the imports (6.1 percent) was higher than those of the exports. The growth in imports is also mainly due to re-exports and also to the increase in domestic expenditure.

Highest growth rate in household consumption in over three years

Households spent 1.2 percent more in the third quarter of 2005 than during the same quarter in 2004, corrected for price changes. This is the highest growth rate since the first quarter of 2002.

Dutch consumers mainly spent more on goods, particularly durable consumer goods. Consumers bought more consumer electronics, furniture and clothes but spent less on new cars.

Consumers also spent more on services, but the increase was as modest as it had been in previous quarters. Remarkably, for the first time in five years consumers spent more in hotels, restaurants etc.

Remarkable recovery of government consumption

The volume of government consumption in the third quarter was 1.3 percent higher than in the third quarter of 2004. After eighteen months of reduced expenditure, the Dutch government again spent more on general public services. Also real expenditure on care and welfare recovered.

Substantial recovery in investments

In the third quarter of 2005 the fixed capital formation was up by 6.6 percent on the same quarter of 2004. Half of this was due to higher investments in dwellings. Investments in machinery and equipment, infrastructure, company cars and airplanes also increased. However, the greatest increase was in the investments in computers.

Construction and commercial services carry production growth

From the production perspective, construction and commercial services carry economic growth. Construction benefited from the recovery in housing construction. In commercial services the growth rate mainly came from the wholesale trade and transport involved in re-exports, and the temporary employment agencies. Production in non-commercial services (government and care) saw a modest growth rate.

Dutch industrial production was virtually equal to that of 2004, lagging behind previous periods of recovery. In contrast to a recovery in the chemical industry there was negative growth in the electro technical and means of transport industries. The production of natural gas was substantially lower because less gas was sold abroad. Production in agriculture also lagged behind, especially in horticulture.

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