Dutch households weather higher energy prices as income growth cushions impact
Lead — In a recent analysis, ING indicates that Dutch households are managing the pressures from elevated energy prices primarily due to strong income growth that mitigates the impact of these costs. Per the full note from ING, while spending on energy has indeed increased, it still constitutes a smaller share of household income compared to four years ago, suggesting resilience in consumer spending dynamics. This finding holds significance as we look toward broader economic implications for the Eurozone, particularly how Dutch consumer sentiment may inform ECB policy and influence EUR/USD dynamics.
What the desk is arguing
The desk views the ING report as evidence that robust income growth in the Netherlands is cushioning households against rising energy costs. This is crucial information that suggests limited immediate risk of a consumer spending slowdown, which could weigh on economic growth and subsequently influence monetary policy decisions.
The supporting data reveals that the percentage of household income allocated to energy expenses remains below the 2022 crisis levels, despite recent increases. Specifically, households are currently spending more on fuel than last year, but historical context shows a smaller share of income is being affected, indicating a moderate financial ability to absorb these costs.
The alternative perspective would imply a looming affordability crisis similar to what transpired during the peak of the 2022 energy crisis. However, the data suggests that any potential downturn could be overstated given households' adaptive income capabilities, thus deflating fears of a substantial economic contraction in the near term.
Where it sits in our coverage
Our internal consensus target for EUR/USD currently stands at 1.075 with a range between 1.04 and 1.12. Notable firms providing forecasts include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's interpretation aligns with jpmorgan's optimistic stance, reflecting a more favorable outlook than bofa, which adopts a conservative approach. This view indicates a potential upward bias in pricing as economic resilience is factored into market expectations.
How other firms see it
Consensus views among aligned firms highlight a belief in the euro's stability driven by economic resilience in the Netherlands. In contrast, bofa stands out as a dissenting voice, suggesting vulnerabilities in consumer spending could emerge under prolonged inflationary pressures.
Relevant currency pairs to monitor include EUR/JPY, as movements in the Eurozone's economic outlook can directly impact repercussions in Japan's monetary policy, especially given the ongoing divergence in central bank trajectories.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Dutch households are managing higher energy costs due to strong income growth.
- 02The share of income spent on energy remains lower than during the 2022 energy crisis.
- 03ING's data suggests consumer spending is more resilient than initially feared.
- 04This economic resilience may influence ECB policy considerations moving forward.
Market implications
Traders should watch for EUR/USD movements, particularly near the critical 1.075 level, as economic data continues to emerge from the Netherlands. Additionally, shifts in consumer sentiment could signal adjustments to ECB monetary policy, influencing broader euro performance.
Risks to this view
Potential risks to this outlook include a sudden spike in energy prices that could surpass households' income adaptability, or a downturn in economic data indicating weaker-than-expected consumer sentiment. Such factors could prompt reevaluation of current positions within the EUR/USD framework.
Articles Dutch households weather higher energy prices as income growth cushions impact Published 07:10 The Netherlands Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download ING household data for the Dutch economy shows that average spending on fuel and energy is now higher than in 2022. But as incomes have risen substantially, the share of income spent on fuel and energy is still significantly lower than it was four years ago Bert Colijn and Dimitry Fleming The rise in energy prices has not led to a broad-based deterioration in affordability, including among the lowest-income households. The Middle East crisis has not triggered a repeat of 2022 Since the outbreak of the Middle East conflict at the end of February, energy prices have remained elevated.
This has been particularly evident in the oil market, where prices have far exceeded 2025 levels due to the closure of the Strait of Hormuz. Natural gas prices, which are also important for electricity costs, have increased as well, but have remained closer to levels seen in previous years. Initial concerns about a new affordability crisis were significant, but have eased as oil prices retreated from their peak levels.
To assess the impact on households, we looked at new ING data on spending patterns. While the share of household income spent on fuel and energy has increased, it remains below the levels seen during the 2022 energy crisis through June. As chart 1 shows, the average amount spent on fuel and energy remains historically high.
However, for the households in our sample, most of the increase in energy bills occurred in 2023 and 2024. The current crisis has not yet had a significant impact. This is not surprising given the delayed pass-through to household energy contracts and the relatively muted rise in gas prices.
Fuel spending is still near the highs seen in 2022. This is consistent with fuel prices responding very quickly to changes in oil prices and oil prices responding more significantly to the closure of the Strait of Hormuz. The nominal amount spent on fuel and energy is at or close to a peak Average monthly spending per household in euro, seasonally-adjusted Source: ING transaction data, calculations ING Research "> Source: ING transaction data, calculations ING Research Household energy costs have been stable, while fuel has reacted more quickly As a share of income, energy bills have remained fairly steady so far this year, accounting for around 3.4% in our sample.
Fuel spending has shown a more noticeable increase, rising from 2.7% of income in December to 3.1% in April. Since then, however, that share has started to come down as oil prices have fallen from their peak and household incomes have increased. Overall, the impact of the Middle East war on the most directly affected spending categories has therefore been muted.
In June, the average amount of income spent on fuel and energy was 6.1%. That is back to where it was in December of last year and down from 6.4% in April. Income spent on energy and fuel therefore remains far from the 2022 levels of well above 7%.
Of course, there are no guarantees for the months ahead. Household energy bills adjust with a lag and could therefore still rise as a share of income. But given current natural gas prices, we are far from expecting a return to the levels seen in 2022.
While oil and gas prices have moved up substantially since the Middle East war reignited, both remain significantly below the peaks seen this spring. That should temper any further increase in household energy costs in the coming months, although the global environment remains highly uncertain. As share of household income, monthly spending on fuel and energy has not increased materially Average monthly spending per household on energy and fuel*, as % of income, seasonally-adjusted * Net payments to energy suppliers and spending at fuel stations Source: ING transaction data, calculations ING Research. "> * Net payments to energy suppliers and spending at fuel stations Source: ING transaction data, calculations ING Research.
No broad-based deterioration across income groups We find little evidence of a material deterioration in affordability across income groups. For the lowest 10% of incomes in our sample, fuel and energy spending remains higher in absolute terms, but the share of income devoted to these costs has changed little. Some income groups have seen more pronounced changes, mostly related to fuel spending.
But overall, the data does not point to a broad-based deterioration in affordability. All income groups now spend less as part of their income on energy and fuel than in 2022 before the energy subsidies kicked in. Little difference in spending on fuel and energy between income groups Monthly spending on energy and fuel* as % of household income, average per income decile, seasonally-adjusted * Sum of net payments to energy suppliers and spending at fuel stations Source: ING transaction data, calculations ING Research. "> * Sum of net payments to energy suppliers and spending at fuel stations Source: ING transaction data, calculations ING Research.
Confidence has weakened more than actual spending What this means for the Dutch economy is that while consumer confidence has been bouncing around significantly in response to the conflict in the Middle East and concerns about higher inflation, spending in the categories most exposed to energy prices has not changed materially as a share of household income. This is also true for the lowest-income decile in our sample. This finding is consistent with general spending patterns, which have remained resilient despite the large shock to consumer confidence.
So while the flare-up of the conflict in the Middle East has caused energy prices to spike again, aggregated transaction data shows that, on average, household finances remain quite resilient. We expect Dutch consumer spending growth to remain muted but still positive, as underlying income growth supports improved spending despite higher inflation and weak confidence. About the data This analysis is based on aggregated transaction data from a panel of approximately 15,000 ING customers' households aged between 20 and 80.
As the transaction data is aggregated, neither the data nor the findings can be traced back to individual customers. The sample was drawn using stratified sampling by province and age group and subsequently weighted by age and income decile to better reflect the composition of Dutch households. The analysis includes only households with income from employment, social benefits/allowances or pensions.
Self-employed households are excluded. As a result, the dataset is not a complete representation of the Dutch household population, and outcomes may differ from official Statistics Netherlands (CBS) figures. Netherlands GDP Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Bert Colijn Chief Economist, Netherlands Bert Colijn is ING's Chief Economist of The Netherlands. He joined the firm in July 2015 and covers the global economy with a specific focus on the eurozone.
Prior to this, he worked at The… Dimitry Fleming Senior Data Analyst, Netherlands Dimitry Fleming is a Senior Data Analyst in Amsterdam. He joined the firm in 2001 and in addition to creating economic insights from client data, he focuses on developments in Dutch banking markets… In this article The Middle East crisis has not triggered a repeat of 2022 Household energy costs have been stable, while fuel has reacted more quickly No broad-based deterioration across income groups Confidence has weakened more than actual spending About the data
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