Dutch Prices Drop for First Time Since at Least 1997

By Jurjen van de Pol

Aug. 6 (Bloomberg) -- Consumer prices in the Netherlands fell from a year earlier for the first time since at least 1997 in July after utilities cut natural-gas prices by 20 percent.

Dutch prices, using a harmonized European Union method, declined 0.1 percent last month after rising 1.4 percent in June, the national statistics bureau in The Hague said on its Web site today. That was the first annual drop since the data series began in January 1997. From the previous month, July consumer prices dropped 1.6 percent.

Utilities including Essent NV, the nation’s biggest, reduced charges by one-fifth in July, which lowered overall inflation by 1 percentage point, according to the statistics bureau. While lower prices boost household purchasing power, increased job insecurity is damping consumer spending across the euro region. The Dutch unemployment rate rose to the highest in more than two years in June.

“The difference between Dutch and European inflation has become smaller, but we don’t expect a deflation scenario with enduring lower prices,” said Marten van Garderen, an economist at ING Groep NV in Amsterdam, who forecasts full-year inflation at 0.9 percent in the Netherlands.

European consumer prices fell by the most in at least 13 years in July after energy costs declined. Crude oil has dropped 40 percent in the past 12 months after reaching an all-time high in July 2008.

Consumer-Goods Market

Unilever, the maker of Lipton tea and Magnum ice cream, anticipates the volume of the consumer-goods market in Western Europe “may even be negative” as unemployment rises and consumer confidence remains low, Chief Executive Officer Paul Polman told a conference call for analysts today.

While European retail sales fell more than economists forecast in June, there are signs the recession is easing after the European Central Bank cut its key interest rate to a record low of 1 percent and governments spent billions of euros on stimulus measures.

The Dutch economy’s second-quarter contraction will be smaller than that in the previous three months, Finance Minister Wouter Bos said last month. The economy shrank by a record in the first quarter as exports dropped and rising unemployment curbed consumer spending. The report on second-quarter gross domestic product is scheduled for release on Aug. 13.

Based on a national calculation of inflation, consumer prices in the Netherlands increased 0.2 percent in July from a year earlier, below the 0.7 percent median estimate of four economists in a Bloomberg News survey. That was the lowest reading since December 1987, according to data from the statistics bureau.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net