Danish inflation remains unchanged year-on-year in July, likely to average 1 pct in 2018

Danish inflation remained the same in July on a year-on-year basis. Inflation stayed unchanged at 1.1 percent year-on-year. This was higher than consensus expectations of 0.8 percent. Core inflation also surprised on the upside, increasing to 0.9 percent from 0.7 percent last month.

On a sequential basis, the consumer price index rose 0.8 percent. This was the highest monthly rise registered over the past year. The increase was mainly because of a sharp rebound in rents on summer houses, which by itself contributed 0.54 percentage point to the monthly change in the overall CPI. With this rise, the category Restaurants and hotels added 0.44 percentage point in July.

Moreover, prices on flights and package holidays surged in the month, with Recreation and culture positively contributing 0.5 percentage point. This was above expectations as the warm Danish summer was believed to keep any price rises in this area below normal, noted Nordea Bank in a research report. Lower prices of clothing and footwear subtracted 0.30 percentage point to the month-over-month inflation numbers. But, this follows the usual seasonal pattern with the summer sale.

On a year-on-year basis, Danish inflation remained unchanged at 1.1 percent compared to the previous two months and therefore still at a post-November 2017 high. Housing and transport are still the main contributors. Together these two categories account for over 0.6 percentage point of the total rise in year-on-year inflation.

Danish inflation is likely to increase a bit in the months ahead as positive base effects from higher prices of petrol will continue to exert upward pressure on year-on-year inflation figures. Meanwhile, higher rents on summer houses will likely continue to underpin the inflation figures and increase in food prices.

“In total, we expect Danish inflation to average 1.0 percent in 2018 – down from 1.2 percent in 2017. In 2019, we expect inflation to average 1.4 percent”, added Nordea Bank.