Danish inflation drops back to zero in September, likely to rise higher in October

Danish inflation dropped back to zero in September. It remained unchanged in the month on a year-on-year basis, down from 0.2 percent in the previous month. It came in below the consensus projection of +0.3 percent. Meanwhile, core inflation dropped to 0.3 percent year-on-year in September from 0.6 percent year-on-year in August. The lower inflation in September is expected to be for a brief period of time as diminishing effects from oil prices would begin to push inflation higher in months ahead, said Nordea Bank in a research note.

Communication prices in September fell 10.6 percent year-on-year, hence negatively contributing 0.23 percentage points to the overall consumer price index. This resulted in a solid downward pressure on services prices that were up 1.3 percent in September, the lowest rise in over 50 years.

Moreover, clothing and footwear prices were also a drag on inflation. Prices in September dropped 2.9 percent, subtracting 0.13 percentage points from the overall CPI. Diesel and petrol prices dropped about 3 percent year-on-year in September, negatively contributing 0.10 percentage points to the overall CPI. On the other hand, rents on housing and summer houses positively contributed largely to the year-on-year figure.

Inflation in Denmark is expected to move higher gradually in October as the base impacts from the lower oil prices would wane, according to Nordea Bank.

“We expect Danish inflation to reach close to 1.0 percent in the beginning of 2017”, added Nordea Bank.