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WRAPUP 1-Dutch recession worse than thought, more pain seen

Published 09/24/2009, 05:23 AM
Updated 09/24/2009, 05:27 AM
TTEF
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* Q2 GDP revised lower

* July consumer spending declines

* September business confidence down sharply

* Small bump in manufacturing only bright spot

By Ben Berkowitz

AMSTERDAM, Sept 24 (Reuters) - A downward revision in second-quarter growth, a deeper decline in business confidence and a further dip in consumer spending all pointed on Thursday to more pain in months to come for the struggling Dutch economy.

Even though the government recently improved its forecasts for growth and unemployment in 2010, Thursday's data made clear it would be a long road to that recovery.

"Overall of course the Dutch economy is in relatively bad shape still," said Aline Schuiling, senior economist at Fortis Bank Nederland. "The economy is not getting off the ground as quickly as other countries in the euro zone."

Statistics Netherlands says second-quarter GDP declined 1.1 percent from the first quarter and 5.4 percent from a year earlier. Those figures were worse than the initially reported 0.9 percent sequential decline and 5.1 percent annual decline it reported a month previously.

Total consumer spending in July fell 2.1 percent, better than the revised 2.9 percent decline in June. However, spending on food, beverage and tobacco declined sharply month-over-month, even as all other categories improved.

Schuiling said consumer spending in particular was being hurt by declining house prices and the weakness in the stock markets in the first half of this year.

"Consumption in the Netherlands tends to be hit relatively hard by the wealth effect," she said. "In that respect the Netherlands tends to do worse than other euro zone countries."

September business confidence was -9.8 points, worse than the -9.3 points in August. Order books fell in all areas except semi-finished goods.

The only slight bright spot was manufacturing output, which rose 0.4 percent in July after an upwardly revised decline of 0.2 percent in June.

That is broadly in line with the general improvement in the NEVI Purchasing Managers Index, which showed industry growth in August after 14 months of contraction. Manufacturers have said they are seeing "robust" growth in new orders and an accompanying rise in output.

On Sept. 15 the Dutch government published its 2010 budget and macroeconomic forecasts, projecting a flat economy in 2010 with unemployment of 8 percent.

In June it had forecast GDP contraction of 0.5 percent with unemployment of 9.5 percent. (Reporting by Ben Berkowitz; Editing by Andy Bruce)

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