The well-known saying is: when Germany sneezes, the Netherlands will catch a cold. But where the German economy contracted by 0.1 percent in the second quarter, the Dutch economy actually grew by 0.5 percent. No koutje for the Netherlands, is it? NU.nl discusses it with Carsten Brzeski, chief economist at ING Germany.
Why is the economy faltering among our eastern neighbors?
A lot has to do with the German car industry, says Brzeski. Automakers such as Mercedes, Volkswagen and BMW, which normally pull the cart in Germany, suffer from the trade conflict between the United States and China and the slowing global economy.
There were also wave movements in the first quarter, says the ING economist. "For example, the mild winter caused a lot more activity in the construction sector," said Brzeski. And what was built in the first quarter can now no longer be built, making this sector less successful in the second quarter.
The approaching Brexit also led to such a wave, says Brzeski. Sales were up in the first quarter due to the hammer. However, these storage cupboards are now full, which has considerably reduced trade between the United Kingdom and Germany.
See also: German economy shrinks by 0.1 percent in second quarter
The Netherlands does not seem to have the same problems as Germany, how is that?
The Netherlands is a little less sensitive to problems in the real traditional manufacturing industry, says Brzeski, referring to the car industry, for example. Germany relies much more on this manufacturing industry and as a result the economist has for years been able to reap the benefits of the demand in industrial markets for emerging products.
"The Dutch economy is more focused on services," explains the ING economist, "This makes the Netherlands a little less sensitive to problems in the manufacturing industry. Every disadvantage therefore has its advantage."
"Every disadvantage has its advantage" Carsten Brzeski, chief economist at ING Germany
Brzeski sees that industrial production is slowing down in the Netherlands. If that persists, the Netherlands may still be able to grasp the cold of Germany, Brzeski says laughing.
See also: Dutch economy unexpectedly grows by 0.5 percent
Okay, so the biggest problem in Germany seems to be the car industry, is this only due to the trade war?
No, says Brzeski. In addition to the trade war, China-specific factors also play a role.
First the trade war: due to the Chinese import tariffs on goods produced in America, some BMW and Mercedes models are hit, which damages the companies. In addition, the Chinese economy is cooling off due to the conflict, which reduces the demand for German cars.
"German automakers have slept a little" Carsten Brzeski
In addition, according to Brzeski, there are also Chinese problems that have nothing to do with the trade war. "An arrangement has come to an end where you get a tax advantage when buying a car," says the economist, "which reduces the demand for cars." The Chinese also switch en masse to electric cars. "And German automakers have slept a bit there," says Brzeski.
See also: Global economy is cooling down, is a recession close?
Will the German economy rebound in the third quarter?
"If you look at figures from the past months, they are actually more worrying than the contraction of GDP," says Brzeski. So no.
With the worrying figures, the economist is referring to, among other things, consumer confidence and figures from German industry. "The consumer is becoming more afraid and the tendency to spend is decreasing," says the ING economist. The service sector is also coming under pressure. "And for me that is an approach to what is happening in the domestic economy," said Brzeski.
Due to the disappointing figures, the ING economist does not expect a strong resurgence of the German economy in quarter three. He expects a slight contraction in the third quarter or minimal growth. "Last year we had the water shortage which reduced economic growth, but if it rains more the next quarter, then the problem is solved," says Brzeski. "But I don't see anything that could lead to such a 'rebound'."
What should happen for such a quick rebound?
The ING economist actually sees only one scenario that can lead to a recovery in the third quarter.
"If Trump and Xi Jinping come together tomorrow and come to a trade agreement, the exports go through in September, but that's really the only thing."