The agreement between the industry and Ireen Wüst

Industrial production in our country was almost 13% higher in December than twelve months previously. With such percentages you immediately think that something is not right. In this corona time I will immediately look at December a year earlier. Was production perhaps very low then? Production in December 2020 was not very strong, but neither was there a decline. So that +12,6% from December 2021 is impressive.

That is especially the case when you compare it with all the stories about delivery problems and shortages of materials. And even if you compare it with our eastern neighbours, the performance is impressive. The following picture shows the development of production in the processing industry in the Netherlands and Germany on an index. We know, of course, that the automotive sector in Germany is very large and has had problems for years. That is why I have also included the automobile production in Germany in the chart.

I am not quite sure what part of the total manufacturing industry in Germany is made up of the automotive sector in Germany. If you assume 20% and keep it constant over time, you can calculate how the other 80% of German industry has developed. That shows the next picture. But even if you ignore car production in this way, the performance of the Dutch entrepreneurs is remarkable.

Statistics Netherlands reported that mechanical engineering in particular has the wind in its sails. Production there in December was more than 48% higher than a year earlier. We also saw the problems in the car industry with us: the transport equipment sector produced 11,6% less in December than a year earlier. The following picture shows the development of production in mechanical engineering in the Netherlands and Germany. I don't know how they manage it, but I think this really deserves a round of applause.

The Olympic achievements of both countries
Now that I'm playing the Netherlands-Germany while the Olympics are going on, I've also listed the medal harvest of both countries. The first picture shows the medal harvest (medals won as a percentage of the number of medals awarded at those games; not weighted by gold, silver, bronze) at eight Summer Olympics, from 1992 to 2020. The German sports performance at the Summer Games look suspiciously like the automotive sector. What the hell is going on there? Although the Netherlands has won more medals over time, the percentage remains fairly constant as the number of events has increased over time.

The last picture shows the medal harvest of the winter games from the games since 1994. The figure for 2022 is based on the medals won until last night as a percentage of the total number of medals awarded so far. Well, if the KNSB succeeds in getting an ice floor on which ours in particular can skate well…. Draw your own conclusions. My conclusion is this: Ireen Wüst, Irene Schouten, Suzanne Schulting: what top women we have!

Inflation without end
According to the CBS series, inflation in our country was 6,4% in January, compared to 5,7% in December. The HICP series that had already been published a week earlier made an even bigger jump: from 6,4% in December to 7,6% in January. Last week I suggested the possibility that the January gains may have been due to the absence of a sell-off. But I was wrong. Clothing and footwear became more than 10% cheaper in January compared to December and that is a slightly larger decrease than in previous years. Energy remains the biggest culprit and was responsible for more than 3%-points of the 6,4. Food prices also accelerated.

The fact that inflation on the HICP measure is higher and rose more in January than on the CBS measure is partly due to the costs of living in an owner-occupied home. Statistics Netherlands does take this into account and the HICP does not take into account the costs of living in one's own home. This will sound paradoxical to many. After all, house prices are rising fast and then you expect a series that includes such costs to be higher. However, the costs of living in one's own home are not based on house prices, but on the development of rents. The government has firmly restricted the rise in rents. As a result, the costs of living in one's own home are only 0,7% higher than a year earlier, according to the statisticians. This has a weight of over 15% in the inflation basket. It means that apart from this component, inflation according to the CBS series is about 7,4%, close to the HICP.

I find it interesting that the contribution to inflation of the cost of living in the owner-occupied home in the US is actually increasing. Like the CBS, the statisticians in the US use 'imputed rents' (Owners' equivalent rent). And just like us, house prices are rising in the US. But unlike us, rents in the US are rising as you would expect in a normally functioning market. The next picture shows that imputed rents follow house prices, albeit with some lag and certainly not one-to-one. I have written about this several times. The imputed rents have a weight in the US inflation basket of more than 24%. The increase now stands at 4,1% year-on-year. The chart suggests that this percentage could rise further in the near future. Then it will be very difficult to see headline inflation quickly approaching 2%.

US inflation stood at 7,5% in January, compared to 7,0% in December. Energy also plays an important role in the US. One difference between the US and the eurozone is that the US labor market is much tighter than ours and that wage growth is accelerating. This is also happening with us, but to a much lesser extent.

The following picture shows the percentage of companies that say they have increased wages in the last three to six months, according to the monthly survey by the National Federation of Independent Business. The picture leaves nothing to be desired in terms of clarity.

Hans de Jong

Han de Jong is a former chief economist at ABN Amro and now a resident economist at BNR Nieuwsradio, among others. His comments can also be found on Crystalcleareconomics.nl

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