New figures from Statistics Denmark on Thursday showed that consumer prices – i.e., inflation – rose by 10.1% in October compared to the same month last year. This is the highest annual increase in the consumer price index since November 1982, when the increase was exactly the same.
According to TV2, Jeppe Juul Borre, chief economist at Arbejdernes Landsbank, was shocked and commented: “These are appalling figures. We were clearly hoping for a decrease and easing of inflation in today’s numbers.” In an analysis, he wrote that the sharp price increases are eroding Danish household budgets at the fastest rate in 40 years.
According to Jeppe Juul Borre, the average Danish family with children now needs to have almost 45,000 Danish kroner extra out of pocket each year, and this is obviously only due to price increases – that is, if the family does not change its consumption.
The chief economist also says that the rise is hurting many Danes, and the impact on consumption cannot be avoided.
What is inflation?
- Inflation is a sustained increase in the general price level.
- In other words, this means that the prices of goods and services generally rise so that the value of money decreases.
- The opposite development, where money becomes more valuable, is called deflation. Both inflation and deflation—if they are particularly high—can have significant economic consequences for society.
Electricity and heat lead to increased inflation.
The inflation rate in September was 10%, and the last time the figure fell was in December 2021. According to Statistics Denmark, the housing, electricity and heating category is particularly dragging down the consumer price index, contributing 4.2 percentage points to the increase since last year, largely due to higher electricity and gas prices.
But according to Søren Christensen, chief economist at Sydbank, it was not included in the latest inflation figures, and he commented to TV2: “We can start to rejoice when we get the November figures, we will see a decrease.”
Several factors slow inflation
Both Sydbank and Arbejdernes Landsbank predict that, given the decline in energy prices, inflation figures may soon fall. If the weather gets colder, we could see a slight increase in gas and electricity prices. Søren Christensen believes the market scenario seen at the end of August appears to have been canceled for this winter. Meanwhile, global food prices, commodity prices, and shipping costs have all decreased, as noted by Jeppe Juul Buri.
Therefore, although “nothing is set in stone” and a cold winter with reduced energy production poses a risk, he also expects inflation to be lower than it was in October very soon. “All of this helps to curb a significant increase in inflation,” says Jibi Gul Puri.
