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Inflation down in Denmark but forecasts tentative for 2023

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Ritzau/The Local - [email protected]
Inflation down in Denmark but forecasts tentative for 2023
Inflation fell in Denmark in November but high prices are still prevalent. Photo: Bo Amstrup/Ritzau Scanpix

Inflation took a step backwards in Denmark in November but the cost of food and fuel remains high.

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Prices of consumer goods and services were up 8.9 percent on average in November compared to November 2021.

Although this is a severe figure for inflation, it is lower than the one-year inflation figure of 10.1 percent registered by Statistics Denmark in October.

It is also the first time since December 2021 that the inflation measure is lower than the previous month’s inflation, the stats bureau said in a latest report.

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“It’s a gigantic relief that inflation is finally falling,” senior economist Jeppe Juul Borre of Arbejdernes Landsbank told news wire Ritzau.

“Danes have this year faced the worst inflation for 40 years and it has eaten away at people’s wallets,” he said.

“Price increases have made it around 40,000 kroner more expensive for an average Danish family in annual costs,” he added in written comments.

Lower prices for gas, electricity, diesel and petrol in November compared to the previous month can be credited for the lower inflation rate, according to senior analyst Louise Aggerstrøm Hansen of Danske Bank.

“Today’s numbers correspond to an average family with children paying 3,250 kroner more each month on their regular costs compared to a year ago,” she wrote in a comment.

Although inflation has taken a step backwards, it is still far higher than what would be considered a normal level for prices increases year-on-year.

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

Inflation of around 1-2 percent has been around the normal level seen in recent years.

Higher inflation means that consumers’ have lower purchasing power than previously.

Forecasts for inflation trends in coming months remain tentative despite the encouraging nature of the latest figures, Borre said.

“Energy prices define the direction to a huge extent and we have recently seen how quickly energy prices can go up,” he said.

“And it’s certainly not unlikely they could go up even more,” he said.

Hansen said she expected inflation for December to be up again as energy prices rise. However, a marked drop can be expected for inflation in 2023.

That is in part because the comparison to 12 months earlier will be with prices that were already high, rather than pre-inflation prices.

“In addition, there is still a large uncertainty about the outlook for electricity and gas prices during both this winter and next,” she said.

READ ALSO: Energy prices in Denmark rise as winter weather sets in

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