A historically tight labor market, sharply fluctuating stock prices and inflation reaching into the double digits. 2022 has been quite an eventful year, economically. But what will 2023 bring us? In this new series, Charles Kalshoven, macroeconomist and senior strategist at APG, tells us what we can expect from the housing market, the labor market and the stock market and more, in the coming year. Today part 1: What is 2023 going to be like for my wallet?
Whether wages will rise faster than the price of the so-called shopping cart, and whether the government will take measures to mitigate the effects of high inflation, are important things to know regarding the content of our wallets. Although there are still many uncertainties, particularly about inflation, Kalshoven does not see things looking bleak for the average Dutch person’s wallet in 2023. However, differences between individuals will be greater than in other years.
Looking at wages, the Central Planning Bureau (CPB), the Dutch Central Bank and others expect them to rise more than 4 percent next year. That may seem a bit meager with inflation at 14.3 percent in October. Consequently, the FNV demanded a 14.3 percent wage increase this month. Kalshoven believes that is not realistic. “Companies will also have higher energy bills and possibly higher rent, so that makes it hard for them to say ‘we’ll provide a raise of over 10 percent.’ They also often can’t fully pass on the increased costs to customers because then they’ll lose market share. A 4 percent wage increase may not seem like much when you look at inflation, but it is higher than we’ve experienced in years.”
The question then becomes what prices will do. Inflation is expected to reach about 10 percent over 2022. The CPB now assumes that inflation will come in at 2.5 percent next year. “That would be a lot lower than the European Central Bank’s expectation of 5.5 percent for inflation across the euro zone. But in and of itself, this is not surprising. In fact, Dutch inflation is well above European inflation this year. Also, the energy ceiling agreed on at the last minute before Prince’s Day will suppress inflation.”
Good to know: the CBS inflation figure for this year is an overestimate of what people will really feel in their wallets. That’s because the basic premise of the masters of calculation is the fiction that every Dutch person signs a new energy contract every month, and thus has to deal with this year’s high variable tariffs. In reality, that only applies to a limited group, because many people have a fixed energy contract. “For next year, therefore, a price decrease will be incorporated into the inflation rate that not everyone will recognize.”