De Jong summarizes a grim series of developments in the Dutch economy: Household consumption has almost come to a standstill, consumer confidence has now fallen again for two consecutive months. Production in industry is also falling sharply, the volume of investment in fixed assets was lower in April this year than last year. And the same goes for export. “It’s all bad in construction, because the number of building permits issued for homes in January through April was 20 percent lower this year than a year earlier.”
‘I hold my heart’
First industry, now also services
One silver lining is that unemployment is low, but according to De Jong it is only a matter of time before it starts to rise. However, the picture De Jong paints is not limited to just the Netherlands, the economy is weakening worldwide. And this is particularly true of the industrial activity of the large countries. This process had been going on for some time and, what’s more, the malaise is now also affecting the service sector: ‘entrepreneurs’ confidence in the service sector is declining and it was even the pillar’.
Finally, the data on world trade are down and the data on transshipments in European ports by De Jong are not very cheerful. “This warms up quite a bit.” De Jong suspects we are heading towards a recession scenario, “a recession that will last even longer with high interest rates.” At the same time, according to De Jong, ‘many’ price deals have been made, as a result of which the wage price spiral continues to lurk.
Long and deep recession
De Jong fears a recession that will not only last longer, but will therefore also be deeper. “I’m actually a little scared of it.” A possible positive scenario is represented by company inventories. After all, the small business is driven by many companies using equities. Once these stocks are depleted, demand could sharply increase again.
‘Hope for the best, but prepare for the worst’
Never mind that De Jong suspects there is still a lot of contraction ahead. How strong this contraction will be depends on rising interest rates and the fact that politicians have little room to make adjustments. Central banks can’t lower interest rates because they have to control inflation, governments can’t stimulate much because their budget deficits are so high. On the positive side, energy prices have fallen sharply and the financial situation of households, banks and businesses is better than on the eve of the financial crisis 14 years ago.