Denmark: Tax cuts keep inflation below the euro area – Nordea

Nordea economist Jan Størup Nielsen notes that Danish inflation eased slightly in July, with headline consumer prices up 1.7% year-over-year and core inflation steady at 2.3%. He highlights that seasonal factors such as higher rents on summer houses and package holidays boosted monthly prices, while lower electricity tariffs and falling food prices, especially pork, helped keep Danish inflation below the Euro area.

Seasonal factors and tax cuts drive CPI

"In July, Danish consumer prices increased by 1.7% year-over-year, down from 1.9% in June."

"Compared to June, the overall Danish consumer price index increased by 1.2%. This was the largest monthly increase in the consumer price index since July last year."

"Due to the government's decision to reduce the tariffs on electricity to the EU's minimum rate from the start of the year, electricity subtracted 0.68 percentage points from the annual inflation rate."

"In July, overall inflation in the eurozone was 2.9%. Thus, inflation in the eurozone is still markedly above that of Denmark."

"There are two reasons why inflation in Denmark is currently markedly lower than in the eurozone. The first and largest reason is the large reduction of the electricity tax in Denmark."