Danish headline inflation undershoots expectations in December

Denmark’s inflation accelerated in December, but it undershot consensus expectations. Consumer price inflation in the nation rose 0.5 percent, as compared with November’s rise of 0.4 percent. Market expectations were for a rise of 0.7 percent. The lower than expected inflation was mainly because of a strong downward price pressure on communication.

Meanwhile, housing made the biggest positive contribution to the headline inflation. It added 0.47 percentage points to the year-on-year CPI figures. Transport contributed 0.19 percentage points, whereas food prices added 0.13 percentage points.

Meanwhile, the sharp decline in prices of telephone services in July continues to exert strong downward pressure on communication. Prices on telephone service fell 12.8 percent year-on-year thereby negatively contributing 0.22 percentage points to the overall inflation. This led to a solid downward pressure on prices on services that accelerated just 1 percent in December, the lowest annual rise ever recorded, noted Nordea Bank.

Inflation in Denmark is expected to accelerate higher in the months ahead as base effects from increased oil prices would gain momentum.

“We expect Danish inflation to go above 1 percent in March 2017. On average we expect Danish inflation to reach 1.3 percent in 2017”, added Nordea Bank.