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Why inflation is up in Denmark for the first time in nearly a year

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Ritzau/The Local - [email protected]
Why inflation is up in Denmark for the first time in nearly a year
Inflation was up in Denmark in July. Photo: Maria Albrechtsen Mortensen/Ritzau Scanpix

Inflation has risen in Denmark for the first time since October 2022, increasing from 2.5 percent in June to 3.1 percent in July.

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The latest inflation figures from Statistics Denmark can partly be explained by the return of an electricity tax in July, which increases the cost of energy for consumers.

The tax had been temporarily cut by the government to the lowest level permissible in the EU, as a measure to help reduce energy costs in response to spiralling prices in 2022.

This meant that tax added to electricity bills went from 0.8 øre per kilowatt hour in June to 68.8 øre per kilowatt hour in July.

Another factor in the higher interest rate is an increase in rental rates at holiday homes or summerhouses, according to analysts.

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It should be kept in mind that inflation of 3.1 percent is still far lower than the 10 percent peak inflation of October last year.

The summer increase is likely to be a blip which will be followed by further reductions to inflation throughout the autumn, according to senior economist Tore Stramer of the Danish Chamber of Commerce.

“If we look forward to the autumn and winter, we expect a renewed fall in inflation. That should be seen in the context of production and food prices having fallen a lot in recent months,” Stramer said in a written comment.

“In addition, a majority of retail businesses expect sale prices to go down in the near future,” he said.

Minister for the Economy Troels Lund Poulsen also commented on the uptick in inflation, describing it as a detail that does not change the overall picture of falling inflation.

“The new number underlines that we should still keep a close eye on inflation. But it’s also important to underline that this is not something that indicates we are looking at period with larger increases in inflation. And Denmark is still one of the countries in Europe with the lowest inflation,” he said.

Core inflation, which does not account for energy and food prices and thereby can be used as a measure for the spread of inflation through other parts of the economy, was found to be 5.3 percent in July, 0.4 percent higher than the previous month.

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