Danish headline inflation slowdown in September, likely to rise slightly in coming months

Denmark’s headline consumer price inflation dropped in September. On a year-on-year basis, inflation slowed to 0.6 percent in the month, from August’s 1 percent. Nevertheless, increased prices on gasoline and food might underpin higher inflation going forward.

Sequentially, the headline consumer price index dropped 0.3 percent in the month. Fall in prices of package holidays and holiday home rents mainly drove the decline in the headline figure. Rents on holiday home dropped 30 percent in September, thus negative contributing 0.31 percentage points to the sequential change in the overall CPI. Therefore, hotels and restaurants negatively contributed 0.45 percentage points.

On a year-on-year basis, the fall in inflation was driven by housing and transport. Together, both these two categories account for over 0.65 percentage point of the total rise in year-on-year inflation. Meanwhile, lower food prices have begun to make a negative contribution. Nevertheless, with the poor harvest in several nations including Denmark, food prices are likely to move higher again in the coming months, noted Nordea Bank.

Denmark’s inflation is likely to rise a bit in the months ahead, reaching about 1 percent at the end of the year. This expected rise will partially be driven by positive base effects from higher prices of petrol. This might continue to exert upward pressure on year-on-year inflation figures.

“At unchanged oil prices in DKK, transport alone will add around 0.4 percent point to year-over-year inflation for the rest of 2018”, added Nordea Bank.