While 2010 seems to have finished with reasonable growth in household consumption, the outlook for 2011 remains more sober.

Weak labour markets and high rates of unemployment put incomes under pressure. At best governments can only watch, and in some cases add to sobriety by implementing their much needed austerity measures. All in all, not a solid base for economic growth in Western Europe.

The Netherlands – A freeze or a thaw?

The freeze at the end of 2011 caused a sharp surge in gas production which was expected to push growth figures up for the fourth quarter of 2010. The Dutch spent more due to the cold weather but not from choice. In December consumer confidence declined with people pessimistic about the general economic situation and their own financial situation for the coming 12 months. In contrast producer confidence climbed sharply in December 2010, the first clear expression of positive sentiment since the start of the crisis in 2008.

France – Private consumption closes year in style

The French economy appears to have closed the year strongly in quarter 4, fuelled partly by robust private consumption. When consumers will be restrained in 2011 by austerity measures and slower growth of purchasing power, producers could step in to fill this gap with rising investments. Despite their rising foreign order outlook, limited domestic demand and low capacity utilisation mean this scenario is far from certain.

Spain – Stagnation and adjustment

The recovery in 2011 is expected to be sluggish, similar to last year. An important factor behind the slow economic recovery is the continuing adjustment process in the structure of the economy. With the collapse of the overheated real estate sector, residential investment dropped markedly. In 2011, this will continue to act as a drag on economic growth.

UK – Tough and uncertain year ahead

The recovery had plenty of pace in the closing stages of 2010, although the services sector weakened considerably. Private consumption was expected to grow robustly in the fourth quarter of 2010, with consumers frontloading ahead of the VAT hike. But consumption growth in 2011 will be weak amid the upcoming fiscal squeeze. The only hope is that the external sector will finally support the recovery.

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