Dutch inflation has risen, even compared to other European countries. The increase is not so much related to food and energy, but above all to the large Dutch service sector. This, combined with falling producer confidence and an imminent interest rate hike, has BNR’s in-house economist Han de Jong fearing a recession.
Inflation is disappointing, De Jong calls it a considerable increase. “Compared to last year, when inflation was 14.5 percent, it’s not that bad, of course, but we had already dropped sharply to 4.4 percent in March.” De Jong also calls the increase considerable compared to other countries. For example, inflation decreased in Germany and Belgium, while it increased slightly in France and Spain. So we are in the wrong group. And here that increase is greater than in France».
“The rate of inflation is disappointing”
It is true that we see food inflation declining somewhat and energy inflation has also decreased, but what De Jong notes is that inflation in the (significant) service sector has increased. ‘The big picture is not positive.’
ECB interest rate hike
Also, the European Central Bank is likely to hike interest rates on Thursday as inflation in the eurozone as a whole is well above the ECB’s target. According to De Jong, the ECB has ‘started very late’ with rate hikes, and is lagging behind the Americans. While the ECB may adjust the pace, the bank will continue to raise interest rates.
“The big picture is not positive”
De Jong is also not satisfied with the decline in producer confidence reported by CBS. He points out that two measures are used to measure business confidence in the sector. According to Statistics Netherlands, it is still above the long-term average, so from that perspective the drop in confidence isn’t all that bad.
recession
An alternative benchmark is that of the Dutch Association of Purchasing Managers, Nevi. And that measure points to a contraction, despite the easing of inflationary pressures on the industrial sector. “If you look at the details, yeah, it doesn’t look very good,” says De Jong. The economist expects inflation to rise over the next couple of months, but combined with Nevi’s data he still fears a recession. “I fear it will come by the end of the year.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
