Has Denmark’s record price inflation peaked?

Consumer prices have climbed 8.7 percent since July 2021, according to figures from the government agency Statistics Denmark.

Has Denmark’s record price inflation peaked?
Danish customers are paying considerably more for food than they were 12 months ago- File photo: Liselotte Sabroe/Ritzau Scanpix

An 8.7 percent increase in prices in Denmark represents the highest rate of inflation the country has experienced since 1983.

It is also 0.5 percent higher than the inflation level recorded in June.

Inflation is measured as a corrected average of price increases over a one-year period for product groups including food, energy, restaurant visits and clothes.

Skyrocketing prices for food, electricity, and fuel are driving the change to price indices.

Food and non-alcoholic drinks were 14,6 percent more expensive in July than they were 12 months prior. The category for milk, cheese and eggs has seen a 24.5 percent increase in price over the last year.

“Today’s numbers are equivalent to an average family having to pay 5,300 kroner more for their monthly consumption compared to a year ago,” Danske Bank’s senior economist Lars Olsen said in a written comment.

“Even if you account for wage increases during that time, there is still a fall in living standards of 3,200 kroner per month,” he said.

But there could soon be an end to the discouraging numbers and spiralling prices, according to another analyst.

“If our prognosis is correct, inflation will peak during the late summer and will gradually increase towards the turn of the year,” said Tore Stramer, lead economist with the Danish Chamber of Commerce (Dansk Erhverv).

“And then in 2023 – hopefully before we reach the summer – we will have inflation back at two to three percent, which is a more normal level,” he said.

That prediction is subject to uncertainty, Stramer stressed. Inflation has previously confounded expectations and has increased by more than predicted in recent months.

“If we get new increases in energy prices and the cost of raw materials, we can’t rule out inflation becoming stuck at the current high level for longer than expected,” he said.

Danske Bank’s Olsen also said he expect inflation to trend downwards in the latter months of 2022.

But it will be “a long time before we are down at normal inflation levels”, he said.

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Exchange rate: What are your options if you live in Denmark but have income in pound sterling?

The value of the British pound has fallen steeply against the dollar in recent days but also against the Euro – and the krone. So what should you do if you live in Denmark but have income – such as a pension, rental income or a salary – in pound sterling?

Exchange rate: What are your options if you live in Denmark but have income in pound sterling?

Exchange rates might sound like a spectacularly dull topic, but if you live in Denmark (where, naturally, your day-to-day living expenses are paid in kroner) but have income from the UK in pounds, then the movement of the international currency markets will have a major impact on the money that ends up in your pocket.

This is not an uncommon situation – Denmark-based Brits may work remotely as freelancers from British companies and be paid for invoices in pounds, while retired Brits might be receiving a British pension.

Others might have income from rental properties or investments.

So a big loss in the value of the pound against the euro – and by extension, the krone – can have a major impact on Brits in Denmark.

The most recent fall in the value of the pound was sparked by the UK government’s new mini budget and has already seen a relative recovery. 

The pound-krone exchange rate over the last month. Chart:
But while this one-time fall is spectacular, it’s also part of a longer term trend in the fall of the value of the pound, especially since Brexit, that has seen people such as foreign-based pensioners lose a big chunk of their income.
The pound-krone exchange rate over the last 10 years. Graph:

So if you have income in pounds, what are your options?

Income in kroner – obviously this isn’t an option for everyone, especially pensioners, but the best way to protect against currency exchange shocks is to make sure that you’re paid in the same currency that you spend in.

Alternatively, income in euros: the advantage of the euro in Denmark is that its value is pegged to the krone and not sensitive to exchange rate fluctuations.

For those being paid from abroad, billing in euros means you could work in any EU country – including the anglophone ones like Ireland – and get your salary in euros.

Depending on your employer, it might also be possible for you to ask to bill in euros. 

Work in Denmark – if you’re currently not working or want to switch to local currency income, then an obvious option is to take up some work in Denmark.

Depending on your work and residency status, as well as the field you work, the practicality of this option ranges wildly from one person to the next.

READ ALSO: How can you get a work permit in Denmark if you are not an EU national?

Exchange rate – if your income can only be paid in pounds, it’s crucial to ensure that you get the best exchange rate possible and that you don’t waste money on international transfer fees.

The best options here are online banks or money transfer services, which compete on the rates that they offer, so usually have the most advantageous rate.

Some online banks also have the option to set up accounts in both pounds and kroner, so that you can receive money in pounds and spend it in kroner without having to make bank transfers, which can attract fees.