GDP growth eases in Q3

GDP growth slows but beats market expectations: The economy lost steam in the third quarter, with GDP expanding 0.8% on a seasonally adjusted quarter-on-quarter basis (Q2: +1.1 qoq s.a.). The moderation largely stemmed from softer momentum in public spending and fixed investment. That said, the expansion exceeded both market expectations and the EU average of 0.3%. On an annual basis, economic growth sped up to 1.7% in Q3 from 0.8% in the previous period, marking the fastest increase since Q1 2023.

Public spending, fixed investment and a deterioration in net exports drive moderation: On the domestic side, fixed investment growth slowed to 0.7% in Q3 from 0.8% in the prior quarter. Additionally, government spending growth softened to 0.8% in Q3 (Q2: +1.1% qoq s.a.). That said, ongoing expansionary fiscal policy was supportive during the quarter, with rising expenditure in healthcare and public administration. Moreover, private consumption rebounded, growing 0.8% in the third quarter (Q2: -0.7% qoq s.a.). Rising household purchasing power supported the improvement and boosted purchases of clothing and home furnishings. On the external front, the net contribution of trade dipped slightly: Exports of goods and services rose 0.4% in Q3 (Q2: +1.7% qoq s.a.), while imports of goods and services growth waned to 0.6% in Q3 (Q2: +1.1% qoq s.a.).

Muted growth outlook ahead with prevailing downside risks: Looking ahead, GDP growth is forecast to cool from Q3’s level and broadly stagnate through end-2025. Nonetheless, over 2025 as a whole, the economy will outpace both 2024’s projection and the Euro area average thanks to accelerating private spending plus improvements in fixed investment and exports. Downside risks include weaker-than-expected EU demand and trade tariffs under U.S. President Trump hitting investment and exports growth. A high risk of government collapse further clouds the outlook.

Panelist insight: ING analyst Marcel Klok was unenthusiastic about the GDP growth outlook: “Growth in the nearest quarters is expected to be sluggish. It will mainly depend on consumers and the (semi)public sector. As the inventory and semiconductor cycle may improve somewhat next year, international trade may pick up its pace again, but still, it looks like growth in the Netherlands will be below potential for a while.”

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