Sharp decline in Dutch consumer confidence.


The September 2007 precipitous decline in Netherlands consumer confidence is a record, according to a short September 25, 2007 review of the situation posted on the Dutch News website (Amsterdam.) The posting says further, "It is the first time the consumer confidence index has been negative for over a year."

The review adds a caveat that the September 2007 consumer survey was conducted during the first 10 days of the month when "the news was dominated by the turmoil in the international financial markets caused by the US mortgage crisis." And expert opinion attesting to the strength of the Dutch economy is widespread.

This general feeling is supported by Netherlands macroeconomic performance in recent years as well as estimates of performance for 2007 and 2008. According to October 2007 statistics supplied by the International Monetary Fund (IMF), the Dutch economy grew by 3.0 percent in 2006. This was its best performance since a 3.9 percent GDP increase in 2000.

The IMF expects Dutch GDP to grow 2.6 percent in 2007, and 2.5 percent in 2008. Inflation is under control. The IMF estimates the Dutch rate of inflation will grow 2.0 percent in 2007, and 2.2 percent in 2008.

Unemployment figures are likewise positive. Unemployment has been declining since 2005 and for 2007, again according to the IMF, will finish 2007 at 3.2 percent. The unemployment rate will be slightly lower in 2008--3.1 percent. The Dutch labor market is generally referred to as "tight."

So it sounds like no alarm should issue from the wildly uncharacteristic drop in Dutch consumer confidence.

Except that the slide has continued into October 2007.

Does low consumer confidence really spell trouble for Netherlands economic prospects? We note that Dutch consumer gloom appears just ahead of what should be...

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