Danish inflation slows further in December, likely to remain at current levels in coming months

Inflation in Denmark slowed down for the second straight month in December. The consumer price inflation dropped 0.3 percent sequentially, mainly because of lower food prices that negative contributed 0.12 percentage points from the headline print. Electricity prices and cloth prices also subtracted from the headline figure. Meanwhile, gasoline prices added to transport in line with rising oil prices. On a year-on-year basis, headline inflation was down to 1 percent, while core rate fell to 1.2 percent.

Prices of services remained the same at 2.4 percent in December, whereas goods prices dropped 0.7 percent. The lower goods inflation was partially due to lower taxes on cars which were implemented in October. Cars negatively contributed 0.09 percentage point to the overall year-on-year inflation in December.

Danish inflation is expected to stay around the current level in the months ahead, noted Nordea Bank in a research report. Higher price on gasoline is likely to exert upward pressure on the year-on-year figures. Meanwhile, lower base effects from especially food prices would begin to drag inflation downwards, while lower taxes on cars would continue to have a negative impact, added Nordea Bank.

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