Denmark’s inflation rises higher in October, likely to reach near 1 pct in early 2017

Denmark’s inflation accelerated in October in annual terms. It rose 0.3 percent, consistent with consensus forecast. Core inflation accelerated 0.4 percent in the month. The acceleration in October marks the start of the period of rising inflation in the nation as the base effects from oil prices begin to wane, noted Nordea Bank in a research note.

Housing was the largest positive contributor to the October headline inflation. It contributed 0.31 percentage points to the year-on-year headline figure. Also, restaurants & hotels and recreation & culture positively contributed to the headline inflation, pushing it higher.

Meanwhile, telephone services prices dropped sharply in October, continuing to exert a strong downward pressure on Communication. Telephone service prices in October fell 12.6 percent year-on-year, thus subtracting 0.23 percentage points from the overall inflation. This has resulted in a strong downward pressure on services prices that increased 1.4 percent in the month. This is close to the lowest rise in over 50 years.

Inflation in Denmark is expected to continue to increase in the months ahead as the base effects from the lower oil prices will wane. Inflation is likely to reach close to 1 percent at the start of 2017, according to Nordea Bank.