Danish inflation rises marginally in May; likely to accelerate later this year

Denmark’s inflation continues to be around zero as of now. The county’s consumer prices on a year-on-year basis were up 0.1 percent y/y in May. Price of goods is mainly responsible for low inflation. Last month prices of products dropped 1.6 percent y/y, whereas those of services were up 1.9 percent y/y. In recent years, consumption mix is changing. Consumption of goods is stagnating, whereas there is an increased demand for services.

Meanwhile, renting a summer house is becoming quite expensive. On a sequential basis, the prices increased 0.2 percent in May because of increased prices for rent of cultural services, cottages and personal care. Prices for books, package holidays and clothes, on the other hand, declined in the month. This kept inflation low over the month.

However, rise in price was registered by several things even if the annual inflation rate was almost zero. Maximum rise in price was registered in services such as bank charges and rent. Meanwhile, the clothing, gasoline and gas prices all dropped in May as compared to last year, keeping the inflation low.

Denmark’s core inflation in May rose 0.2 percentage points in May to 0.6 percent, much lower than the level seen one year ago. However, in the months to come, Denmark’s inflation is likely to accelerate as the base effects from lower oil prices begin to fade away. Assuming that oil prices rise to about USD 60 per barrel by late 2016, inflation in the country is likely to accelerate beyond 1 percent by the end of 2016, said Nordea Bank in a research report.