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30 December 2021 General
Horecaterrassen tijdens de coronapandemie

(c) Shutterstock

The FD sentiment indicator, based on articles in Dutch financial daily Het Financieele Dagblad (FD), has partially recovered following a sharp drop at the start of the coronavirus crisis. However, concerns about the spread of the virus continue to weigh on sentiment. This is evident from a DNB analysis published today. The recovery is most noticeable in the sub-indicator reflecting the sentiment in financial markets. At the end of 2021, this sub-indicator has reached an even higher level than just before the coronavirus crisis. Sentiment in the business, economic and political sub-indicators, although improved, has not yet returned to pre-pandemic levels.

Sentiment falls, but recovers strongly

Figure 1 shows the development of the sentiment indicator (red line) and its four sub-indicators: financial markets (red bars), companies (blue bars), economy (green bars) and politics (yellow bars). The coronavirus crisis has led to a historically sharp fall in the sentiment indicator across the board. The fall was about twice as deep as at the time of the financial crisis.

Figure 1 FD sentiment indicator by sub-indicator

Figure 2 zooms in on the development of the indicator over the past two years. The figure clearly shows that the spread of COVID-19 caused the FD sentiment indicator to plummet across the board, falling by as much as 84% between January 2020 and August 2020, when it hit its low. This coincided with a contraction of gross domestic product (GDP) by 8.7% in the second quarter of 2020 compared to the first quarter of 2020, the largest contraction of the economy ever measured by Statistics Netherlands.

Figure 2 FD Sentiment indicator by sub-indicator

The relatively limited contribution of the financial markets sub-indicator to headline sentiment during the coronavirus crisis is striking. At its low in August 2020, the fall in this sub-indicator contributed only 15 percentage points to the fall in the headline indicator. By way of comparison, the business and economic sentiment sub-indicators contributed 32 and 21 percentage points to this negative trend, respectively. The restoration of confidence in financial markets after the low was strong, in line with the rise in stock market indicators. The financial markets sub-indicator has therefore been above its pre-crisis level since March 2021.

Sentiment indicator upswing comes to a halt in 2021

The steady improvement of the sub-indicators already halted in April 2021. Concerns about economic recovery grew due to supply constraints such as material and labour shortages, as well as rising inflation and ever-increasing house prices. Since September 2021, renewed concerns about the growing number of coronavirus patients in hospitals added to the stagnation.

On balance, the sentiment indicator has partially recovered from the decline at the start of the coronavirus crisis over the course of 2020 and 2021, but concerns about the spread of the virus continue to weigh on sentiment. To date, the sub-indicator for financial markets is the only sub-indicator that has reached a higher level than before the outbreak of the pandemic.

Coronavirus drives sentiment

Figure 3 shows the trending words within the articles that contributed most to the sentiment dynamics. This helps to interpret the indicator. The COVID-19 virus and the pandemic featured prominently in the FD newspaper. The figure shows the words that occurred relatively often in 2021 and rarely in the four previous years (2017-2020): the larger the word, the more often it occurred. The words have a colour ranging from bright red to bright green. A word is green if it often appeared in articles with a positive sentiment, and red if it appeared mostly within a negative context. The words “corona” (coronavirus) and “besmetting” (infection) are red, for example. The word “positieve” (positive) is also red; this has to do with the fact that it was often used in negative articles about the coronavirus (e.g. about rising numbers of positive tests). The words “vaccin” (vaccine) and “goedkeuren” (approve) are coloured green, because they often appeared in articles with a relatively positive sentiment. Besides the coronavirus situation - with trending words like “pandemie” (pandemic), "lockdown", "vaccin", and "RIVM" - the formation of the new cabinet was also trending. This is shown in the figure with words like “kabinet” (cabinet)  and “Rutte” (the Dutch prime minister). Words like “klimaat” (climate), “groen” (green) and “elektrisch” (electric) show that sustainability was also a hot topic. The five words with the highest trend score for 2021 were: “demissionair” (outging, related to the cabinet formation) “vaccin”, “prikken” (doses) “gevaccineerd” (vaccinated), “avondklok” (curfew). This underlines the extensive media attention for the vaccination campaign and the coronavirus containment measures.

Figure 3 Word cloud of trending words in 2021

wordcloud FD

Notes: Top-100 most trending words in the FD newspaper. The size of the word indicates its frequency. Red: relatively negative sentiment (compared to average sentiment in 2021), Green: relatively positive sentiment (compared to average sentiment in 2021)

(c) FD-database, berekeningen DNB.

More information about the use of the FD sentiment indicator by DNB

On 26 March 2021, the sentiment indicator developed by DNB based on newspaper articles in Het Financieele Dagblad (FD) was introduced in the FD and on DNB's website (see here, in Dutch). Since then, the indicator has been a regular part of the variables included in our model to forecast GDP growth in the current and coming quarter.

Dnbanalyse - FD sentiment indicator annual overview: 2021 in the rear-view mirror (dutch only)