Danish consumer price inflation rises year-on-year in January, likely to rise 1.4 pct this year

Danish consumer prices are showing signs of rising at a more brisk pace after coming in the lowest since 1953 last year. In January 2017, Denmark’s consumer prices were up 0.9 percent year-on-year, thanks to the rise in price in services such as gasoline, rent and TV subscriptions. In the household budget, the major item is the housing rent that is always adjusted in February.

The adjustment was 1.7 percent and since rents contribute 20 percent to the overall CPI, the development is of great significance. Meanwhile, prices of clothing, telecommunication services and computer equipment were lower in January as compared to one year ago. Therefore, this keeps inflation low.

“It can’t be excluded that the much commerce with clothes on the Internet draws structurally down in the price of clothing, like the falling prices of telecommunication services is structural”, noted Nordea Bank in a research report.

On a sequential basis, Danish consumer prices stagnated, although there were increased prices particularly charter travels, TV subscriptions and water supply charges. On the other hand, falling prices for gas, clothing and footwear brought the price index down.

Danish consumer prices are likely to continue rising. The combination of higher growth in Denmark’s economy and the increased commodity prices would eventually also result in higher prices. However, it is challenging for firms to push prices increases on to consumers due to the fierce global competition. According to Nordea Bank, consumer prices are expected to rise 1.4 percent in 2017.

Therefore, Danish households might see a rise in real wages in 2017. At present, wages are rising by over 2 percent on an annual basis that can add to higher economic growth if increasing purchasing power is translated into increasing private consumption, added Nordea Bank.