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Danish Inflation Lowest in 62 Years

Danish Inflation Lowest in 62 YearsDanish Inflation Lowest in 62 Years

Danish consumer prices rose last year at their slowest pace since 1953, dragged down by cheaper energy and excess capacity in the economy.

Consumer prices rose only 0.5% in 2015 from 2014, the lowest year-on-year increase since 1953, Statistics Denmark said on Monday, Reuters reported.

Excluding lower energy prices, inflation was 1.2% in 2015. In 2014, the inflation rate was only marginally higher, at 0.6%.

“The fact that inflation continues to be low is a sign of crisis,” Danske Bank’s chief economist, Las Olsen, said in a note to clients, citing excess capacity in the economy following the financial crisis as a cause.

However, low inflation is helping the economy in some respects, Olsen said.

“The very low inflation in the last two years largely explains why we have had good growth in private consumption and consequently a recovery in the economy, although exports have disappointed,” Olsen said.

Most economists expect Danish inflation to pick up this year. Few are worried about a deflationary spiral.

Following the EU-harmonized method Danish inflation rose 0.3% in December year-on-year, accelerating from a 0.1% increase in November.

Denmark’s central bank raised its main interest rate last Thursday, as it sought to stay calibrated with recent policy moves by the European Central Bank in order to keep the Danish currency steady against the euro.

The Danish central bank, known as Danmarks Nationalbank, raised its deposit rate to minus 0.65% from minus 0.75% as it began a slow retreat from a period of record-low borrowing costs.

Other data from Statistics Denmark on Monday showed that Danish industrial production fell 0.9% in November and that the country’s current account surplus grew to 11.9 billion Danish krone ($1.74 billion) in November from 10.1 billion krone in October.

 

Financialtribune.com