Denmark went from the highest inflation rate in the last 40 years (10.1% per annum in October 2022) to the lowest level since May 2020 (0.1% in October 2023). Lower fuel and electricity costs, together with a fall in furniture prices, were the main drivers of the fall. More specifically, prices for goods fell by 4.4% at an annual rate, while prices for services rose by 4.9%. Core inflation, which excludes energy and unprocessed food, also fell to 3.3% in October. Wages are rising faster than prices, boosting the purchasing power of Danish households, which was eroded by rising prices last year. However, the Danish economy contracted by 0.3% in the second quarter and the Danish National Bank followed the ECB in raising interest rates (the reference rate is 3.60%). A cautionary note on the downward trend in inflation is the case of Norway, which just yesterday recorded its first increase in four months, and the volatility linked to the energy factor: a study published by the Danish National Bank points out that in the long term, Denmark is likely to experience greater fluctuations in electricity prices as the share of solar and wind power in the overall electricity mix increases.
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