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COST OF LIVING

EXPLAINED: What’s causing the highest inflation rate in Denmark for almost 40 years?

This week the government agency Statistics Denmark reported that consumer prices have climbed 8.9 percent in the last 12 months. It marks the highest rate of inflation in Denmark since 1983. The Local spoke to an economist to find out why the cost of living is continuing to rise in Denmark.

A shopping basket of food from Rema, Denmark
The price of food and non-alcoholic drinks was 15.9 percent higher in August than it was in August 2021 according to Statistics Denmark. Photo: Henning Bagger/Ritzau Scanpix

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. This is something that keeps on rising in Denmark and across the world.

The reason, according to economists, is because we have too much money and not enough goods. The Local spoke to Senior Economist Lars Olsen from Danske Bank, to explain.

“A fundamental reason for inflation, not only in Denmark but many countries is that there’s just too much money going around trying to buy too few things, with a supply problem around the globe.

READ ALSO: Danish inflation continues upward trend in latest figures

“The pandemic and the war in Ukraine has affected production and labour markets but we have been giving each other more money, such as the holiday money pay outs (feriepenge) and the corona relief funds in Denmark and that doesn’t add up. So the market is now correcting the situation in the harsh way of making everyone worse off,” Olsen said.

How much has the war in Ukraine affected inflation?

“The war in Ukraine is part of the reason for inflation because of the reduced supply of gas but this is only part of the problem.

“Inflation was going up before the war and inflation is very broad based – it’s not just energy and food prices. It includes materials, furniture, restaurant visits, electronics, anything that we buy at the moment is rising rapidly in price.”

What is being impacted the most?

“Energy prices but this is unevenly distributed. For example, the highest bills are for households with gas furnaces but only 13 percent of households in Denmark have this. 

“Communal [district, ed.] heating is the most common heating system in Denmark and for most people this hasn’t gone up a lot. But we are all using electricity and that’s a lot more expensive, as well as food.”

The price of food and non-alcoholic drinks was 15.9 percent higher in August than it was in August 2021 according to Statistics Denmark.

How have people’s spending habits changed?

“People are definitely trying to buy cheaper stuff. The total amount of kroner spent is continuing to rise, especially if you include travel and restaurants but people are getting less for their money. It’s not that people are buying fewer loaves of bread but the quality of that bread is going down as people buy cheaper items.”

How does Denmark compare to other countries in terms of weathering this inflation rise?

“We’re better off than countries to the south because we use less gas. The average household in Denmark was also financially robust to start off with; we were not as damaged by the pandemic as other countries.”

How much has the cost of living risen for an average household in Denmark?

“For a family with two adults and one or more children, the annual cost of living has gone up by around 60,000 kroner compared to a year ago. Incomes are also rising so it doesn’t feel quite as bad as that.

“The good thing is that during Covid-19 and lockdown, we were spending a lot less, so the average household does have savings and capacity to increase spending, which is why we are not seeing a decrease in spending right now. That said, there are many people who are in a difficult situation right now.”

Lars Olsen is a Senior Economist from Danske Bank.

The European Central Bank last week increased its interest rate in an anti-inflation measure, with Denmark’s central Nationalbank following suit shorty afterwards.

READ MORE: How much will Danish energy bills go up this winter?

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ENERGY

EXPLAINED: When should I turn on my heating in Denmark this year?

Energy costs in Denmark are set to reach sky-high levels this winter, which will leave many people wondering when they should start heating their homes and by how much. Here's what you need to bear in mind.

EXPLAINED: When should I turn on my heating in Denmark this year?

What’s happening?

As a result of supply stoppages for cheap Russian gas, on top of inflation; energy prices in Denmark have been at record levels for months.

Due to the situation, the Danish government has sent money to some homes impacted by high gas prices and parliament is discussing other measures for households. Public buildings are set to see thermostats turned down and outside illumination switched off.

As the temperature starts to drop throughout the country, the heating season is getting underway and many people are wondering about the best way to heat their homes, and if they have to follow any rules. 

READ ALSO: How much will Danish energy bills go up this winter?

Does it make a difference what type of accommodation I live in?

The right time to start heating up your home depends on several factors including your own personal preference, the weather, whether you live in rented accommodation or own your home, and on the heating system in your property.

How does the heating system work in Danish homes?

Around 65 percent of homes in Denmark use district heating. This system distributes hot water from heating plants to houses and apartments through underground water pipes. The system is designed to be able to heat a room to 20 degrees when there’s an outdoor temperature of 12 degrees.

This is known as fyringssæson meaning “heating season”, which usually runs from the 1st October to April 30th and is calculated when the outside daily average temperature drops to 12 degrees Celsius and below for at least three consecutive days, and ends in the spring when it reaches 10 degrees or above for at least 3 consecutive days.

Does my landlord control my heating?

A lot of rented accommodation will use fyringssæson and under Danish tenancy laws, landlords are required to supply adequate heating and hot water at all times. A daytime temperature of at least 21 degrees, sometimes 22-25 degrees, is generally recommended in all rooms via the heating system.

However due to energy costs this year, the government has announced that the temperature in public buildings will be set to 19 degrees, unless there are special circumstances requiring it to be higher. Hospitals, care homes and preschool care are exempted. The temperature in public buildings is usually set between 21 and 23 degrees.

The government has also recommended that people reduce their own heating at home by 1 to 2 degrees.

READ ALSO: How people in Denmark are changing their energy use to keep bills down

How can I keep track of my heating bill?

Earlier this year, the Danish Parliament made a rule that heating companies are obliged to provide information on energy consumption which is sent to consumers seven times a year during the heating season, where you can see how much heat is used. 

It is worth keeping an eye on energy prices and asking the property owner whether the heating system is optimally adjusted.

How can I use the radiators effectively?

“It’s a common a mistake that people sit in one heated room and leave other rooms with the radiator turned off and the door closed,” Michael Nielsen, product manager with Danish cleantech engineering company Danfoss, told The Local.

“But it’s actually more important to use all radiators at same time to heat the whole house and maybe set them a little lower. You will save energy and get more comfort this way,” he said.

Nielsen also recommends not going below a temperature of 14 degrees inside the home.

“Such a low temperature may lead to unpleasant conditions such as condensation on surfaces and mould on the walls and carpet,” Nielsen said.

Setting your radiator to the right temperature will help it work more efficiently. “In Denmark this is usually 21 to 22 degrees but the public advice is to lower this by 1 to 2 degrees this winter, to save on energy costs,” Nielsen added.

Another important thing is to check your thermostat is working and change it if it’s more than 15 years old.

“You can save around 8 percent of energy consumption on each radiator by installing a new thermostat,” Nielsen told The Local.

READ ALSO: ‘Semi off-grid’: Readers’ tips for coping with expensive energy bills in Denmark

How else can I save on heating costs?

There are plenty of ways you can help to keep your heating costs down, the most simple of which are keeping doors and windows insulated with draft excluders, and regularly airing out rooms.

“We recommend airing your house twice a day by opening the windows and turning down the thermostat.
 
“At other times it is better not to turn the heating off completely as it may take more energy to heat up the room again. Instead you should reduce the temperature by 3 to 4 degrees at night,” Nielsen said.

The Danish Energy Agency also recommends the following:

  • Check your house or apartment for any cracks where heat could be escaping.
  • Check your radiators are working efficiently and don’t put furniture right in front of them.
  • Check your windows and doors are keeping heat in or whether they need upgrading.
  • Check the insulation in the outer walls, attic, roof, floors and pipes.
  • Check your heating system is running as efficiently as possible.
 
 
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