Sharp decline in Dutch consumer confidence.

The September 2007 precipitous decline in Netherlands consumer confidence is a record, according to a short September 25, 2007 review of the situation posted on the Dutch News website (Amsterdam.) The posting says further, "It is the first time the consumer confidence index has been negative for over a year."

The review adds a caveat that the September 2007 consumer survey was conducted during the first 10 days of the month when "the news was dominated by the turmoil in the international financial markets caused by the US mortgage crisis." And expert opinion attesting to the strength of the Dutch economy is widespread.

This general feeling is supported by Netherlands macroeconomic performance in recent years as well as estimates of performance for 2007 and 2008. According to October 2007 statistics supplied by the International Monetary Fund (IMF), the Dutch economy grew by 3.0 percent in 2006. This was its best performance since a 3.9 percent GDP increase in 2000.

The IMF expects Dutch GDP to grow 2.6 percent in 2007, and 2.5 percent in 2008. Inflation is under control. The IMF estimates the Dutch rate of inflation will grow 2.0 percent in 2007, and 2.2 percent in 2008.

Unemployment figures are likewise positive. Unemployment has been declining since 2005 and for 2007, again according to the IMF, will finish 2007 at 3.2 percent. The unemployment rate will be slightly lower in 2008--3.1 percent. The Dutch labor market is generally referred to as "tight."

So it sounds like no alarm should issue from the wildly uncharacteristic drop in Dutch consumer confidence.

Except that the slide has continued into October 2007.

Does low consumer confidence really spell trouble for Netherlands economic prospects? We note that Dutch consumer gloom appears just ahead of what should be a robust holiday shopping season.

One local economist told Dutch News, "It doesn't appear that consumers have stopped shopping. They still think they have the money to buy tvs, clothes and furniture."

The Netherlands central bank, while acknowledging a slowing in the growth of consumption as well as total economic output, said "The underlying development of the Dutch economy is stronger than would appear at first sight."

Netherlands has long been seen as one of the world's best developed economies. Observers typically note the country's small size and small population when extolling Dutch out-of-proportion positive contribution to the world economy.

But there is no getting around the fact that the slide in consumer confidence is worrisome. At this writing it is not clear that the drama will have outsized negative impact on Dutch economic prospects. Ensuing economic developments will tell the tale.

Meanwhile, one of the subjects treated in the Dutch central bank's September 2007 Quarterly Bulletin is worthy of mention. The Bank addressed the cost to the economy of long term climate change.

The Bank observed that rising sea levels due to global warming should be closely monitored because of problems for Dutch dikes. Even with an extreme rise in sea levels, says the Bank, the cost of dike improvements is easily absorbed.

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