Consumer confidence dropped dramatically in September. This was caused by bad news about the state of the economy. Nevertheless, the level of household spending was retained. In September and October 2007, Dutch consumer spending was nearly 3 percent up on one year previously. The growth in income and employment affected consumption positively.
Domestic household consumption
Less confidence in the economy
Consumer confidence fell by 16 points in September 2007, the most substantial downturn in history. In the last three months of 2007, consumer confidence barely recovered from this setback. Yet, there are almost as many optimists as pessimists among Dutch consumers.
Consumers were much more negative about the economic climate in September. Opinions about their own financial situation deteriorated and they were slightly less positive about whether it is a favourable time to purchase expensive items.
Consumer confidence, adjusted for seasonal effects
Consumption growth due to favourable situation on the labour market
The downturn in consumer confidence is not reflected in consumer spending. The level of consumer spending was retained due to the favourable situation on the labour market. The growth rate of employment is about as high as during the economic boom of the late 1990s. In the second quarter of 2007, employment had grown by over 200 thousand jobs relative to one year previously. Unemployment receded further. In the period September-November of last year, 4.0 percent of the labour force were unemployed, the lowest percentage in more than half a decade. The number of unfilled vacancies has grown almost uninterruptedly over the last four years and reached an all-time high at the end of September 2007.
More income from labour
The average Dutch household acquired more income from paid labour, moving into a better paid job or working longer hours. Other employees also had more money to spend. The increase in collectively negotiated (CAO) wages was marginally above the average level of inflation in the past two years.
Inflation rate and increase in collectively negotiated wages
Karin van der Ven