Beef plays a leading role in the decline in Dutch inflation

According to Statistics Netherlands' "rapid estimate," inflation in the Netherlands fell from 2,9% in July to 2,8% in August. This was mainly due to the slower rise in prices for "food, beverages, and tobacco." In July, the price increase was 4,1% year-on-year, while in August it was 3,7%. In a brief oral presentation, Statistics Netherlands chief economist Peter-Hein van Mulligen said that the price of meat played a significant role in this.

Such details are not yet public. A month ago, I showed in a graph that beef and veal prices in our country had risen much faster in July than in Germany. In our country, the increase was a whopping 31%. The Germans were still lucky with a 10% increase. Historically, such a difference is highly unusual. Statistics Netherlands (CBS) will publish all the details next Tuesday. Then we will see what happened to beef prices in our country. Beef and veal only account for 0,4% of the inflationary index.

Inflation in the eurozone rose marginally: from 2,0% in July to 2,1% in August. Core inflation remained at 2,3%. The EU statistical office publishes inflation figures based on the HICP (Harmonised Index of Consumer Prices). These figures differ slightly from the inflation figures compiled by Statistics Netherlands (CBS) based on the CPI (Consumer Price Index). As of January 1 of next year, Statistics Netherlands will shift the base year for inflation figures from 2015=100 to 2025=100. Statistics Netherlands reports, somewhat cryptically, that the CPI will then also be closer to the HICP. While Statistics Netherlands' inflation figure (based on the CPI) was 2,8% in August, Dutch inflation based on the HICP was 'only' 2,4%. We often say that our inflation is higher than the eurozone average. And that is true. Yet, thirteen of the other nineteen eurozone countries currently have higher inflation on an HICP basis than we do, and only six have a lower inflation rate. Germany, France, and Italy are among that group of six, and they naturally have a significant weighting in the figure for the eurozone as a whole.

The ECB's policy committee will meet next week. Some time ago, the "doves" (those who advocate an accommodative monetary policy, i.e., low interest rates) argued that the eurozone seemed on track for a period in which inflation could fall below the 2% target for an extended period. Such arguments have been refuted by the latest inflation figures, and I therefore think it likely that the ECB will leave interest rates unchanged next week.

German industry orders disappoint
German industry booked 2,9% fewer orders (in volume) in July than in June and 3,4% fewer orders than a year earlier. This was considerably worse than expected. The pressure on German industry therefore continues. To put such poor figures into perspective, the negative result was mainly due to a whopping 38,6% drop in orders for aircraft, ships, trains, and military vehicles. Excluding these, there was an increase of 0,7%. However, these "large goods" are quite important to German industry. The point is that orders for such "large goods" can be very volatile.

I think back to the euphoric sentiments about Europe earlier this year. Because of Trump, we suddenly had to stop investing in the US, a golden age was supposed to dawn for Europe, and the euro was supposed to rival the dollar. European stock markets suddenly performed much better than American ones, and the euro rose in value. Look at it now, just a few months later. German industry continues to languish, American stock markets have been outperforming European ones for a while now, and the question of whether the French government's debt problems will trigger a new crisis can, no, must, be asked. It doesn't make me happy.

US not strong either
To be honest, things aren't great in the US either. The Fed's Beige Book describes very meager growth, a stagnant labor market, and rising costs for businesses, partly due to Trump's import tariffs. The president wants to stimulate industrial activity in the US. Of course, that won't happen overnight, but developments so far have been disappointing. While industrial business confidence rose slightly in August, according to the ISM (Institute for Supply Management) Purchasing Managers' Index (PMI), it remains below the pivotal point of 48,7 at 50. As a rule of thumb, anything below 50 is bad, and anything above 50 indicates growth. August's 48,7 is better than July's 48,0.

US job growth disappoints again
August brought a meager 22.000 new jobs to the US economy. Last month, there was an uproar when job growth figures for May and June were revised sharply downward. Trump alleged that the Bureau of Labor Statistics (BLS) was manipulating the figures to paint a picture of the economy that was unfavorable to him. He fired the head of the BLS. His successor has not yet been named. This month hasn't been much better for the president. In addition to the disappointing 22.000 new jobs, the figures for the past two months were again revised downward, albeit very modestly: a combined 21.000 jobs were lost.

Unemployment rose slightly: from 4,2% in July to 4,3% in August. Manufacturing employment, which Trump is heavily targeting, is not performing well yet. In August, the number of jobs in the sector fell by 12.000. This was the fourth consecutive month of declines in manufacturing jobs. The loss over the past four months now stands at approximately 52.000.

Miran to be appointed Fed director very soon
The Fed controversy continues. Yesterday, Stephen Miran was heard by a Senate committee. Miran is currently the director of the Council of Economic Advisers in the White House, effectively the president's most important economic advisor.

A month ago, Adriana Kugler unexpectedly resigned as Fed chair. Her term had expired at the end of January. It was clear she wouldn't be reappointed and that Trump wanted someone on the board to take over from Powell in May. But Kugler's departure was completely unexpected.

The term of office for a Fed director is fourteen years. This term is not tied to the individual, but to the "chair." So, there is now a vacancy on the board that expires at the end of January. If someone is appointed now, they can be reappointed for fourteen years, but apparently, Trump hasn't yet decided who he wants as the next Fed chairman. They could have chosen to wait until the choice of the new chairman had been made to fill the "Kugler vacancy." But Trump wants the Fed to lower interest rates, and that's more likely to happen if he can quickly appoint someone to the board who also wants to lower them. Therefore, Trump has nominated Miran, who, after Senate confirmation, will undoubtedly be confirmed quickly. He will then likely remain in office until the end of January or until the proposed new chairman is available.

In the Senate, the Democrats put Miran under pressure. The Fed's independence is important. Miran himself says he agrees, and he strikes me as a very idiosyncratic individual. He argued that he's not following Trump's orders, but that Trump has confidence in Miran's economic vision. It's a rather odd arrangement. Miran isn't resigning from the White House. He's taking a sabbatical and hopes to return to his White House post when his term at the Fed is over. But then he'll have to be tolerated by Trump, and that chance diminishes if he doesn't commit to interest rate cuts. It's all rather unsavory, if you ask me.

Bessent will undoubtedly be appointed in the coming week so he can participate in the policy meeting on September 16th and 17th. The Fed will almost certainly lower interest rates then. I expect that will be the first step in a series.

Meanwhile, Treasury Secretary Bessent has begun interviewing candidates for the Fed chairmanship. Apparently, he's speaking with eleven people. We'll see how quickly that goes and who ultimately wins. By the time the new chairman takes Powell's hammer, the rate-cutting process may already be complete...

Closing
Dutch inflation fell slightly in August. This is apparently mainly due to a slower increase in beef prices. In the eurozone as a whole, inflation actually rose by a tenth in August.

German industry booked significantly fewer orders in July than in June. This remains a problem for Germany and therefore for the entire eurozone, including us.

US economic growth appears to have stalled. Job growth in August was disappointing again. The Fed will undoubtedly cut interest rates in a week and a half. Stephen Miran, Trump's chief economic adviser, will be appointed Fed governor next week, but he will only serve in that role for a few months. He will almost certainly push for a rate cut at every policy meeting he attends.

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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