Dutch Confidence Improves but Remains Deeply Negative

Dutch confidence in February improved to -27 from -28, a ‘small-potatoes’ gain mired in still-deeply net negative readings. The climate reading did worse, falling to -41 in February from -39 in January. But the willingness to buy improved to -17 from -20.

So, what do these index numbers really mean? We can first compare them to historic readings back to 1990. On that basis the three metrics are closely bunched in terms of their ranking. The queue percentile standings that evaluate each index number compared to its own history on this same time-line back to 1990 find them all at a standing ranking from the 18th-percentile to the 22nd percentile. That’s a tight bunching and a set of readings in approximately the lower one fifth of their historic queue of values. A lower 20th percentile reading is weak.

The progression of changes over 12-months to 6-months to 3-months shows a fairly steady increase over different periods (if you were to put them on a common per-month or per 12-month change basis). This is reinforced in the chart where there seems to be a liner progression higher that is relatively stable.

This means the confidence metrics are improving and doing so steadily but also quite slowly.

The table also provides change data back to just before Covid ran loose. The changes show all three metrics net lower on balance from their respective readings on January 2020. The climate variable has worsened the most followed by confidence overall with the willingness to buy metric seeing the smallest short-fall of the bunch. When it comes to shopping never underestimate the consumer. Shopping is a birthright, a palliative when things go wrong, it is a habit hard to stop even when the consumer has no money. As long as there is credit, there is shopping. Amen. No wonder willingness to buy is the least affected metric here, since Covid.

The Dutch economy is still struggling. Industrial production in manufacturing, like confidence, is trimming its year-on year negatives and is improving- but still declining on balance.

The Dutch manufacturing PMI survey moved up sharply in January but still did not quite climb all the way back to the neutral reading of 50.

Retail spending is also falling on balance over 12-months, but again, those 12-month declines have been diminishing as time has passed.

The evidence on the Dutch economy is that there is some progress being made but it is razor thin and slow. Of course, the outlook is brightened by the diminishing inflation rate in EMU and the added flexibility that will give the ECB in making policy looking ahead. Still, current conditions are negative on balance but still roughly stable while undergoing a snail’s pace repair. A call for hedged optimism is appropriate.