As Portugal falls further into a double-dip depression, what is going on in the Netherlands?

Today is the main season so to speak for updates on Gross Domestic Product growth in the Euro zone. We had two updates yesterday and on my way to describing them let me cover off a question which I was asked in quite a few places. Having called the Bank of England the second worst forecasting organisation in the world there were natural enquiries as to who I felt was the worst. Let me explain.


Here are her latest official numbers.

in the 3rd quarter of 2012, the Gross Domestic Product (GDP) at constant prices of year 2005 decreased by 7.2% in comparison with the 3rd quarter of 2011.

These are as bad as I feared and are even worse than before. But if we take Kylie’s advice and Step Back In Time we see that in the Original bailout forecasts back in the spring of 2010 the International Monetary Fund on behalf of the troika forecast growth of 1.2% in 2012! Yes -7.2% instead of +1.2% and it means that the total error is on its way to the mid 20 per cents I think as past numbers were revised down too. I think that the best way to review their forecasts is to take the advice of Diana Ross. … 


Here too we saw  very weak numbers.

The Portuguese Gross Domestic Product (GDP) registered a year-on-year change rate of -3.4% in volume in the 3rd quarter 2012 (-3.2% in the previous quarter).

So we see that the annual rate of fall in Portugal has accelerated and the specific quarterly numbers were weak too.

Comparing with the previous quarter, the Portuguese GDP diminished 0.8% (change rate of -1.1% in the 2nd quarter).

If we look into the detail we see a fading of what has been up to now a bright spark for the Portuguese economy.

the positive contribution of the net external demand decreased significantly, determined by the less intense reduction of Imports of Goods and Services and by the deceleration of Exports of Goods and Services.

These numbers mean that this is now the eighth quarter in a row that Portuguese GDP has been negative. In fact if one looks at the credit crunch overall this latest phase has had more of an impact than the original phase. We hear of the phrase double-dip recession but what we have here looks more like a double-dip depression to me. If we recall that Portugal had an economic growth problem as in lack of before all this began you see the fix she is in.

Unfortunately going forwards there are two more problems to throw into the mix. Firstly unemployment is high and rising as the latest figures show it going from 15% to 15.8% with employment falling. Also we see that more savage austerity measures are planned to be inflicted on a weakening economy in 2013 and we know from Greece’s experience where that road leads.

So excluding Ireland who produces her figures late in the cycle we see that the bailout nations are in the mire. What about those on the edge?


There has been an improvement in the third quarter here compared to its predecessor.

In the third quarter of 2012 the seasonally and calendar adjusted, chained volume measure of Gross Domestic Product (GDP) decreased by 0.2 per cent with respect to the second quarter of 2012 and by 2.4 per cent in comparison with the third quarter of 2011.

However if you hold onto the thought of a -2.4% year on year comparison let me add in an extra perspective. In the third quarter of 2008 Italy had a real GDP of 367.4 billion Euros and this year it was 348.7 billion. So instead of hoped for growth it has fallen by 5% and again please remember this is on the back of a weak pre credit crunch growth performance like Portugal.

Meanwhile the other side of the balance sheet liabilities in the public-sector continue to grow. This weeks numbers for central government debt fell just short of 2 trillion Euros (1.995) but they are edging higher as Italy’s is weakening making for a toxic mix.


Again on an initial viewing these are an improvement on the previous quarter

The Spanish economy registered a quarterly decline of 0.3% in the third  quarter of 2012, a rate one tenth less negative than that recorded in the period  above.

However in annual terms it leaves Spain  in negative territory and heading downwards.

Annual growth stood at – 1.6%, two tenths less than in the second

If we look into the detail of this then after the bad above we have the good.

The contribution of net exports of the Spanish economy to quarterly GDP remains stable at 2.4 points. This result occurs because of an acceleration in exports……

And the ugly (my emphasis)

 This result occurs because of an acceleration in exports and a decrease in the decline of imports.

there is a negative contribution of domestic demand, which reaches -4.0 points compared to -3.8 points in the previous quarter

This allows me to explain Spain’s current position whilst also demonstrating one of the flaws of using Gross Domestic Product as an indicator. When an economy contracts it usually imports less which improves the net trade (exports less imports) section and leads to a higher GDP number for that component. As you can see being poorer and weaker leading to a recorded improvement is not a triumph to say the least! I still recall the quarter for Greece where she initially claimed a 0.8% GDP improvement which was due to this effect. We all know what happened next.

So looking at Spain we see that her domestic economy is very weak but that for GDP it has the offsetting effect that imports fall. She has improved her export performance as I recorded above but overall her position is weaker than the GDP numbers would have you believe. They will catch up in time.

The Euro Area as a whole

I guess these numbers came as something of an embarrassment to Euro area leaders.

GDP fell by 0.1% in the euro area (EA17) and increased by 0.1% in the EU27 during the third quarter of 2012,
Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0.6% in the euro area and by 0.4% in the EU27 in the third quarter of 2012, after -0.4% and -0.3% respectively in the previous quarter.

The mainstream media will be full of Euro area in recession headlines which may or may not be true as the figures are subject to revision. However my point is that the Euro area is doing worse than the most similar countries which are the EU27, so the extra ten are doing better. Lest we forget the Euro was badged as something which would improve economic performance.

If we look further we see that Germany managed some growth as apparently did France so their 0.2% on large economies mostly offset some falls. However we come to a subject which I have covered in detail only once if I recall correctly and the best summary I have seen of it was simply this from Matina Stevis on twitter.


You see economic growth in the Netherlands was -1.1% in the third quarter of 2012. If we look further we see that domestic consumption,government consumption,investment and exports all fell in something of a clean sweep. The real turnaround was in exports which is the opposite of the trends reported elsewhere today.


We see from these numbers that the supposedly rescued nations of Greece and Portugal continue to exhibit the signs of depression. In Portugal’s case we are seeing what now looks like a double-dip recession which sadly I see only getting worse in 2013. Bailout number two awaits her I think. There are signs of further problems ahead for Spain and Italy but for different reasons.

Just as Euro area leaders sigh with relief that Germany and France just about offset this at the macro level we see that the Netherlands is in rough water. An economy which is supposed to be core has now fallen by 1.6% over the past year. It is worth watching I think as it is easy to be lulled into a false sense of security by a number such as an unemployment rate of 5.4%. We get a little more perspective by noticing that it was 4.5% a year ago. I guess many more will be waiting for the numbers for the fourth quarter in the Netherlands than were watching the third.


21 thoughts on “As Portugal falls further into a double-dip depression, what is going on in the Netherlands?

  1. Germany will tip into recession shortly, I think, followed by France. Q4 is not looking promising.

    E27 are doing better – except for Czech Republic which has now been in recession for all of 2012.

    • Hi Frances

      There were quite a few reports that Q3 would be poor particularly for France. So we see a situation where either the official numbers are lagging or we have different measures saying different things!

      I came across this recently in Ireland and intend to discuss it more fully in due course.

  2. Hello Shaun,

    So its safe to say that the EU needs to leave the Euro zone and devalue !

    I think the can kicking will continue until it can’t

    I feel really sorry for the Portugeuse , I used to holiday a lot there in the Algarve, then they joined the Euro , over three years the price inflation was staggering

    Priced me out of their holiday market altogether – its not as if I’m much poorer than then ( I am btw due to job changes ) but the costs!

    the loss of local shops was amazing as well

    got a good lot of roads upgraded but they were on the cards anyway – so no gain there


  3. I have the greatest sympathy for the Greek and Portugese citizens – they are the first to experience what most other western Europeans will in due course.

    We simply aren’t entitled to these lifestyles – we don’t produce enough to earn them. Most European welfare states are unaffordable – they always have been – but cheap borrowing and artificial economies have obscured the truth. Add in demographics and you have to accept its inevitable that peoples’ lifestyles will adjust downwards. The Greeks are just the first to experience this.

    The extra ten are doing better because their lifestyles are already lower and I imagine their welfare states haven’t yet reached the excesses of the seventeen. Arguably we are just seeing a convergence of living standards somewhere in the middle – between the ten and the seventeen.

    Why should Greeks have a better living standard than Estonians or French better living standards than Poles – its not a god given right. For that matter why should any of us have better living standards than the Chinese ?

    • Hi DaveS

      Some of the ten have plans to join the 17 in the Euro. I know some people from these countries (London is very cosmopolitan) and tell them not to do it! The money they look to get is no longer there.

      But whilst that is true for the citizens it is not true for their respective political classes…

  4. Hi Shaun
    The Dutch are experiencing an ‘Irish’ moment. Their housing boom, based on very lax lending, has collapsed and negative equity is widespread. Expediture will suffer for some time. Interestingly just as the Dutch housing market tipped over the edge, the German market took off after years in the doldrums.
    Concerted civil disobedience and dissorder is very close in the Med. Looked like ‘Thatcher versus Scargill’ re-run in the centre of Madrid.

    • Hi JW
      Thank you for reminding me, we discussed it on here not so long ago didnt we? I remember now.

      By the way the Economist magazine has caught up with France’s position by publishing online today I guess they were planning on a negative GDP number to boost it up.

      • Hi Shaun
        The Economist articles on France were predictable.
        Country of contadictions is France, more Fortune 500 company HQs in Paris than any other city in the world except NY. More than 50K new companies created in October, over 500k in 2012 to date. Yet it is beaurocratic, high cost etc.

  5. Golly! Tim Worstall lives in Portugal. If things get worse out there he may elect to return to the UK. Will he pay his taxes or will he expect to free ride on those that do?

  6. Hi Shaun,

    My understanding is that the new coalition government is made up of their Conservative party and a very left wing party called the Poor Party. The deal with the Poor Party has meant that taxes have been sharply raised for employed people, especially social taxes to pay for their underfunded health system and to vastly increase benefits for the ‘poor’.

    I’ve seen one Dutch self employed person complaining on a website that their social taxes had increased by €1000 a month and they are on a can’t afford to live there exodus from The Netherlands.

    How much is true I don’t know, but tax rises from the productive to fund the unproductive economy is not going to pull them out of a recession.

    Still we are only just over six weeks from the end of 2012 and I’m sure it will be remembered as one of the better years, in the European depression.

    • Hi Rods

      If your last point turns out to be true that is a grim prescription. As you know I have feared for a while that 2012 is the new 2009. Now that JW has reminded me about the Dutch housing market it looks as though trouble will remain there for a while.

  7. Hi Shaun, as soon as I saw the Portuguese figured this morning can you guess what two words popped into my head? (Something we keep being told Portugal is .. …..)

    Thinking about the Dutch downturn, I wonder if falling world trade is causing a reverse “Rotterdam effect” to take place?

  8. Hi Andy

    Highway to Hell which they spell “on track”!

    Actually I was thinking of the Rotterdam effect as I wrote the piece and how it doesnt seem entriely consistent for the Netherlands trade position to be so out of sequence as it was. However such numbers are dreadfully inaccurate so there could be cans of worms in all of them.

    And keep typing and thinking of Rotterdam has put the song from the Beautiful South in my mind.

  9. I am in Lisbon right now, having spent the last few weeks in Portugal. The economy is definitely flat / declining and the locals do not expect things to improve for a very long time. Lisbon looks somewhat tired compared to previous visits.
    I watched some of the demonstrations on Wednesday and they were a fairly half hearted affair compared to those in Spain and Greece. As the Portuguese have told me, they are good at enduring hardship and appear to understand the need for some austerity. Having said that I think they are at the limit of what they can endure.
    Visiting a large industrial estate outside Lisbon that has premises for many small to medium businesses I was struck by how many had closed and those that were open appeared very quiet. It is also apparent that, unlike the UK, Germany or France, how little business there is here to support the country. I recall feeling the same thing about Greece in the boom years – where is all the money coming from? Portugal is a poor country that relies on tourism and agriculture but has had a brief mini boom and is now going back to where it came from. Being a member of the Euro does not help.
    Prices are quite high in Lisbon compared to what they used to be although it is still one of the cheapest capital cities to stay in. Again the locals complain about price increases under austerity when they had expected them to decline.
    A bit of a ramble I know but thought I would pass on my (very) subjective observations!

    • And it relied (and still relies) on various subsidies from the EU. Those do, in fact, help unless ‘diverted’ by the greedy and powerful.

    • Hi pavlaki

      Thanks for those. I met a friend yesterday who has just been in Portugal for a couple of weeks and his views on his experiences there were similar. He thought that it was expensive and that you could sense the downturn.

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