Will falling inflation in Denmark mean lower living costs?

Ritzau/The Local
Ritzau/The Local - [email protected]
Will falling inflation in Denmark mean lower living costs?
A low-price supermarket in Aarhus. Inflation has fallen for four consecutive months but when will consumers feel a cost of living improvement? Photo: Bo Amstrup/Ritzau Scanpix

Inflation took another step backwards in February, according to new figures from Statistics Denmark. But how long will it be before the financial burden on consumers lightens?


Consumer prices last month were 7.6 percent higher than they were in February 2022, Statistics Denmark said in preliminary inflation figures published on Friday.

That represents a slight reduction of inflation compared to January, where prices were up by 7.7 percent compared to a year prior.


The small difference means that a trend of declining inflation has continued for a fourth consecutive month after a peak inflation of 10.1 percent was registered in October.

February’s slight drop can be attributed primarily to falling energy prices. Rent costs and food prices continue to be an upwards force on the inflation metric, however.

READ ALSO: Lower energy prices take air out of Danish inflation

Core inflation (Danish: kerneinflation), a measure of inflation which excludes food and energy prices, is sometimes used by economists as a measure of how entrenched inflation has become in other areas of the economy.

That metric was up slightly in February to 6.7 percent from 6.6 percent in the previous month, and is yet to peak.

“In other words, inflation is still stubborn and 2023 will be a year of high inflation like 2022,” senior economist with Sydbank, Mathias Dollerup Sproegel, wrote in an analysis provided to news wire Ritzau.

“This wildly high inflation hurts private finances. A typical family with children in the last year would have to find 30,000-40,000 kroner extra in their household budget to buy the same items as a year ago,” he said.

Lower inflation does not mean falling prices, but that prices increase at a lower rate than previously.

However, an inflation rate lower than wage increases will be experienced by consumers as an overall improvement in their purchasing power.

READ ALSO: Danish store workers get pay rise in new bargaining agreement

“Today’s numbers correspond to an average family with children needing around 2,950 kroner more for their monthly consumption than a year ago,” senior analyst and private economist Louise Aggerstrøm Hansen told Ritzau in an analysis of the figures.

“Even if you take into account wage increases in the meantime, this will be a case of a fall in living standards,” she said.

Although inflation and high prices appear to be resilient, there is also cause for optimism in the figures, according to the economist.

“The difference is that while the strain on family finances just kept increasing in 2022, the arrow is now pointing in the right direction for private Danish finances,” she said.

“We expect a modest falling inflation coupled with relatively good wage increases will meaning a restoration of purchasing power so we are back at the level from 2021 by the time we reach the end of 2024,” she said.

READ ALSO: Why prices in Denmark could still increase despite falling inflation


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