Danish headline inflation accelerates in July, likely to reach 1 pct by 2016-end

Denmark’s inflation in July accelerated 0.3 percent year-on-year. This is unchanged from June and consistent with consensus projection. Last month, core inflation accelerated 0.9 percent. The rise in core inflation was mainly due to increased prices on services. In the future, inflation is likely to accelerate as waning effects of oil prices would bring inflation in Denmark back to about 1 percent by the end of this year, said Nordea Bank in a research report.

Prices on services last month increased 2 percent in Denmark, whereas goods prices dropped 1.4 percent. Rents on housing positively contributed to the year-on-year figures. Meanwhile, lower oil prices continue to exert a downward pressure in the inflation print. Diesel and petrol prices dropped around 10 percent year-on-year in July. This negatively contributed 0.35 percentage points to the overall consumer price index.

Core inflation, stripping non-processed food and energy, accelerated 0.9 percent year-on-year in July. This is the third consecutive rise since the core inflation rate reached an all-time low in early spring, noted Nordea Bank.

“We expect the current gap between the core rate and the overall inflation to become gradually smaller as the base effects from the lower oil prices start to fade away. Under the assumption that oil prices will stay around the current level, we expect Danish inflation to reach 1.0 percent at end-2016,” added Nordea Bank.