Danish consumer price inflation accelerates in July, likely to move higher in months ahead

Danish consumer price inflation accelerated to 0.8 percent sequentially in July. On a year-on-year basis, inflation saw a rise of 0.5 percent – the highest since February 2020. Core inflation accelerated marginally to 1 percent year-on-year from June’s 0.9 percent.

Higher prices of vacations contributed the most to the rise in the headline figure compared to the previous month. Rents on summer houses contributed 0.21 percentage points to the rise, while package holidays contributed 0.36 percent. Nevertheless, it should be noted that the price rise of package holidays is not based on actual numbers but due to the coronavirus estimated from the development in 2019.

The large price increase of cigarettes that was officially implemented on 1 April has begun showing up in the inflation numbers. Unlike last month, most stores were able to sell cigarettes with the old tax stamp. Cigarettes positively contributed 0.16 percentage point to the headline figure.

“Once fully implemented, we expect a positive contribution of close to 0.5 percent point to the year-over-year change in the CPI”, said Nordea Bank in a research report.

Danish inflation is expected to accelerate in months ahead mainly because of the numbers starting to fully reflect the price rises of cigarettes. Meanwhile, the higher activity level in the Danish economy is likely to pave the way for small price rises especially of domestic services.

“All in all, we expect this to cause Danish inflation to move higher compared to the Euro area in the coming year”, added Nordea Bank.