Danish inflation remains unchanged for second straight month at 0 pct in May

Danish inflation remained the same for the second straight month at 0.0 percent in May. Lower prices of gasoline is the main driver behind the unusually low inflation. On a month-on-month basis, consumer price index dropped 0.1 percent, equivalent to unchanged 0.0 percent year-on-year. Core inflation eased to 0.7 percent year-o-year from 0.8 percent in April.

In general there were just minor changes in May. Compared to the previous month the biggest negative drag came from recreation and culture as this subcomponent subtracted 0.16 percentage point from the monthly change in CPI because of lower prices of package holidays. This drop in prices is based on an estimate by Statistics Denmark and not actual data.

Prices of transport were nearly unchanged compared to the previous month. Prices of gasoline made a positive contribution, however, this was countered by an estimated fall in air ticket prices.

“The sharp drop in oil prices that started in late February is still the main driver of the unusually low inflation. In May Transport subtracted 0.47 percent-point from the year-over-year changes. Despite the recent pick-up, oil prices measured in DKK are still more than 30 percent below last year. If oil prices stay unchanged, this negative base effect will continue to be a drag on Danish inflation for the remainder of 2020”, said Nordea Bank in a research report.