Danish inflation rebounds in April, likely to average 0.9 pct in 2018

Danish inflation rebounds following six straight months of falls. On a sequential basis, Denmark’s consumer price inflation rose 0.5 percent. 

The sequential rise was widely based across nearly all sub-indices. Transport contributed 0.10 percentage point because of increased oil prices. Meanwhile, clothing and footwear contributed 0.09 percentage point because of the end of the winter sale. Only education made no positive contribution to the sequential inflation figures in April. The widespread rise in consumer prices might be a sign that firms throughout different sectors now tr to pass on higher labor costs to consumers, noted Nordea Bank in a research report.

On a year-on-year basis, the headline inflation rose 0.8 percent, reversing the latest downtrend. In particular, higher prices of electricity and natural gas made positive contributions in April because of base effects. Also, increased food prices made a bigger contribution.

In the months ahead, Danish inflation is expected to go slightly higher. Positive base effects from higher prices of petrol might continue to exert upward pressure on year-on-year inflation figures. Meanwhile, the positive output gap in the Danish economy should give firms some room to maneuver to push up consumer prices. On the other hand, lower taxes on cars might continue to have a negative effect.

“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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