Danish inflation accelerates in May on increased gasoline prices, likely to average 0.9 pct in 2018

Denmark’s inflation continues to accelerate in May. The headline consumer price inflation rose to 1.1 percent, an acceleration from 0.8 percent in April. The rise was mainly driven by increased prices of gasoline because of a higher oil price and stronger U.S. dollar. In May, transport positively contributed 0.17 percentage points to the month-over-month inflation figures.

Also, restaurants and hotels added 0.17 percentage points. This was mostly because of increased prices of rents on summer houses. Meanwhile, the very warm weather in May led to considerable downward pressure on prices of package holidays. Recreation and culture negatively contributed 0.13 percentage points.

On a year-on-year basis, Danish inflation rose to 1.1 percent in May, the second straight month with a rise and inflation is now at the highest level since November 2017. But, as higher prices of gasoline was the main driver in May, core CPI remained nearly the same at 0.7 percent.

According to a Nordea Bank research report, Danish inflation is expected to rise slightly higher in the months ahead. Positive base effects from increased prices of petrol might carry on exerting pressure on year-on-year inflation figures. Meanwhile, the positive output gap in the Danish economy might give firms some room for maneuver to push up consumer prices. Meanwhile, lower taxes on cars electricity would have a negative impact.

“In total, we expect Danish inflation to average 0.9 percent in 2018 – down from 1.2 percent in 2017. In 2019, we expect inflation to average 1.4 percent”, added Nordea Bank.

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