Lower gas consumption has negative effect on Dutch economy

15/05/2014 15:00
  • Domestic consumption and exports natural gas in decline due to mild winter
  • Economy contracts 1.4 percent relative to previous quarter
  • Negative economic growth 0.5 percent compared to first quarter
  • Dramatic loss of employment, particularly in care sector
  • Economy still in recovery stage, despite some negative developments
  • Investments and manufacturing output up, higher demand for temp workers

According to the first estimate conducted by the Central Bureau of Statistics (CBS), the Dutch economy recorded a negative growth rate of 1.4 percent in the first quarter of 2014 relative to the fourth quarter of 2013. In the preceding three quarters the economy had grown. The lower natural gas consumption as a result of the mild weather conditions in winter largely accounted for the negative growth rate. The economy improves further, but the situation on the labour market is still bleak: 32 thousand employee jobs were lost in the first quarter relative to the fourth quarter of 2013.

Economy 0.5 percent in decline relative to first quarter 2013

In the first quarter of this year, the economy shrank 0.5 percent relative to the same period in 2013. This is largely due to lower consumption, production and exports of natural gas. In the first quarter of 2014, temperatures were exceptionally high, whereas in the first quarter of 2013, temperatures were below average. Despite some negative developments, the Dutch economy is still showing signs of further recovery. Investments increased, Dutch manufacturing industry showed sustained signs of recovery and the demand for temp workers was higher. The shopping-day pattern was the same in the first quarter as in the first quarter of 2013.

Natural gas exports fall substantially, other exports grow

As a result of the extremely mild weather conditions this winter, natural gas exports were almost a quarter below the level of one year previously.  If natural gas exports are not taken into account, Dutch exports of goods were nearly 3 percent up. Apart from agriculture, all sectors performed better. Exports of chemical, electrical and metal products grew notably.

Consumption slows down

On account of the relatively warm weather, the volume of natural gas used by Dutch households was reduced by nearly 0ne-third compared to one year previously. Consumers also spent less on food, drinks and tobacco products, partly because the Easter weekend fell in the second quarter in 2014, whereas in 2013 only Easter Monday fell in the second quarter. The warm weather had a positive impact on the sector hotels and restaurants. Consumers also spent more on durable goods like clothes and electrical equipment.

Investments pick up in construction sector

Investments were higher than one year previously. This was also the case in the preceding quarter. Construction sector investments were significantly higher. The mild weather conditions played a part in this respect. Companies also invested more in machinery and computers, as the capacity utilisation rate and producer confidence increased. Investments in commercial vehicles and company cars were lower than twelve months previously. One of the reasons is the higher tax rate on new motor vehicles and motorcycles (BPM) introduced on 1 January 2014. 

Sustained growth manufacturing industry

The recovery process in the sector manufacturing industry continued in the first quarter. Manufacturing output was nearly 4 percent up from one year previously, partly as a result of higher foreign demand. Apart from the sector mineral extraction and energy supply, only the sector financial institutions recorded a negative growth rate, whereas the construction sector and the sector hotels and restaurants benefited from the mild weather conditions. Horticulture under glass used less natural gas.

Dramatic loss of employment in care sector

In the first quarter of this year, 112 thousand employee jobs were lost compared to one year previously. The most substantial loss by more than 3 percent (43 thousand jobs) occurred in the sector health care and welfare. Employment in the care sector has been in decline since the end of 2012, predominantly as a result of reduced employment in childcare and homecare. In the first quarter, 23 thousand jobs (6.9 percent) were lost in the construction sector compared to one year previously. Loss of employment in the construction sector is the result of the fact that output generated by this sector had plummeted in prior years. In trade, transport and hotels and restaurants employment also fell dramatically in the first quarter.

As the demand for temp workers in the private sector grew, the number of jobs in the sector financial services increased by 13 thousand from one year previously. A higher demand for temp workers generally signals the first stage of recovery on the labour market. At a later stage, companies themselves  start taking on staff.