Danish inflation accelerates in March, likely to continue to move slightly higher throughout 2019

Danish inflation accelerated in the month of March. On a year-on-year basis, inflation rose to 1.2 percent from February’s 1.1 percent. Moreover, core inflation also accelerated to 1.1 percent. The slow uptrend in Danish inflation is likely to continue throughout 2019, noted Nordea Bank.

Prices of services were up 1.5 percent year-on-year, accelerating from 1.3 percent seen in the prior month. Prices of goods rose 0.7 percent year-on-year, unchanged compared to last month.

Sequentially, the consumer price index rose 0.1 percent in the month. Clothing and footwear made the largest contribution, owing to the traditional end to winter sales. On the other side falling prices of electricity caused Housing to subtract 0.08 percentage point to the month-over-month change.

On a year-on-year basis, inflation rose 0.1 percentage point to 1.3 percent in March. Even if the annual update on rents on housing surprised on the downside in February, Housing is still the main contributor to Danish inflation with a positive contribution of 0.31 percentage point. Also, higher gasoline prices pushed inflation higher as they caused Transport to add 0.25 percentage point. Food that has a weight of over 10 percent overall made a positive contribution of 0.20 percentage point in March. Positive base effects from food prices is one of the main reasons why Danish inflation has been moving higher since the drop of 2018.

Since September 2018 Danish inflation has been on a slow upward trend, mainly because of increased prices on Transport and a positive base effect from food.

“We expect Danish inflation to continue to move slightly higher throughout the year thereby the average for 2019 to 1.2 percent, up from 0.8 percent in 2018. The main underlying driver of this higher inflation will come from higher wages that has been rising since 2014. This is expected to cause some spill-over effects to mainly higher service price inflation”, added Nordea Bank.