Danish inflation accelerates sharply in April, likely to further accelerate to 1.4 pct in 2017

Danish inflation accelerated sharply in April. The consumer price index rose to 1.1 percent in the month, the highest level since the start of 2013 and slightly higher than consensus forecast. Meanwhile, the core figure rose to 0.9 percent. According to a Nordea Bank research report, the inflation in Denmark is expected to reach the highest level since 2012.

As usual, housing positively contributed the most to the April inflation figure, adding 0.36 percentage points to the CPI year-on-year figures. Transport contributed 0.31 percentage points, while food added 0.24 percentage points to the headline figure.

Meanwhile, the sharp decline in prices on telephone services that took place in July 2016 continues to exert solid downward pressure on communication. Prices on telephone service dropped in April by 12.7 percent year-on-year, thus negatively contributing 0.22 percentage points to the overall inflation figure. This has led to a solid downward pressure on services prices that accelerated 1.7 percent in April. Prices on goods rose 0.6 percent.

Denmark’s inflation appears set to break the downward trend in 2017 that has dominated since 2013. This will be partially attributed to upward pressures from the base effects of energy, telephony and food. Moreover, the labor market is expected to greatly contribute as accelerating wage pressures can gradually show through by way of price rises markedly in the service sector, stated Nordea Bank.

“On these expectations, we believe that the Danish CPI will grow by 1.4 percent in 2017 – the highest inflation level since 2012”, added Nordea Bank.