Den danske inflation faldt til 0,4 pct. i oktober mod 0,6 pct. i september, men den er fortsat højere end i euro-landene. Nordea forventer, at det vil være tendensen i det nye år.
Lower Danish inflation – but still high compared to the Euro area
In October Danish inflation fell to 0.4%y/y, down from 0.6% last month. Despite the drop, Danish inflation stays well above the Euro area – a pattern we expect to continue into next year
Chart 1: Both headline and core inflation tick slightly lower
Higher prices of vacation and electricity
The Danish consumer price index increased by 0.2% m/m in October. Also core inflation increased by 0.2% m/m. As usual in October, higher prices on vacation made the most positive contribution in the consumer price index compared to the previous month. Also higher prices on electricity pushed the monthly inflation number higher.
Table 1: Contribution to inflation in October
Compared to October last year, the Danish consumer price index was up by 0.4% while core inflation increased by 0.9%. The main contribution to the annual increase came from the large price increase of cigarettes that was officially implemented on 1 April. In October this added 0.36% point to the annual numbers.
Danish inflation stays elevated compared to the Euro area
According to the flash estimate, the Euro-area HICP dropped by 0.3% y/y in October. This implies that the difference in annual inflation currently is 0.7%-point. This marks the fifth consecutive month with higher inflation in Denmark compared to the Euro area.
Chart 2: Higher Danish inflation compared to the Euro Area
Around half of this spread can be explained by the increase in prices of cigarettes in Denmark, and some of it is most likely also due to some unusual seasonal patterns in the Euro area.
Despite this, we expect Danish inflation to stay elevated compared to the Euro area both this year and in 2021.
This expected difference is both due to the base effects from the increase in cigarette prices in Denmark and the fact that the higher activity level in the Danish economy is expected to pave the way for small price increases especially within domestic services. On average we expect Danish inflation to reach 0.8% in 2021 compared to 0.3% in the Euro area.
