Denmark’s inflation eased to 0.4 percent year-on-year in October from September’s 0.6 percent. In spite of the fall, Danish inflation remains above the euro area – a pattern that is expected to continue into next year, stated Nordea Bank in a research report.
The consumer price index rose 0.2 percent sequentially in October. Core inflation rose 0.2 percent. As usual, in October, higher prices on vacation made the most positive contribution in the consumer price index compared to the previous month. Also, higher prices on electricity pushed the monthly inflation number higher.
On a year-on-year basis, the consumer price index rose 0.4 percent while core inflation came in at 0.9 percent. The main contribution to the annual rise came from the huge price rise of cigarettes that was officially implemented on 1 April. In October this contributed 0.36 percentage points to the annual numbers.
Meanwhile, flash estimate showed that the euro area HICP inflation dropped 0.3 percent year-on-year in October, implying that the difference in annual inflation is at 0.7 percentage point. This marks the fifth straight month with higher inflation in Denmark compared to the euro area.
“Around half of this spread can be explained by the increase in prices of cigarettes in Denmark, and some of it is most likely also due to some unusual seasonal patterns in the Euro area. Despite this, we expect Danish inflation to stay elevated compared to the Euro area both this year and in 2021. This expected difference is both due to the base effects from the increase in cigarette prices in Denmark and the fact that the higher activity level in the Danish economy is expected to pave the way for small price increases especially within domestic services. On average we expect Danish inflation to reach 0.8 percent in 2021 compared to 0.3 percent in the Euro area”, added Nordea Bank.