Denmark inflation at four-decade low

danish kronerDenmark’s rate of inflation has dropped to its lowest level since 1967 as the country’s economy stagnated during the first quarter of the year. Headline inflation slowed from 0.9 per cent in June to 0.6 per cent in July, according to figures from Statistics Denmark.

That was 0.2 per cent below the median estimate of 0.8 per cent by four Bloomberg economists. Meanwhile, prices decreased by 0.3 per cent between June and July.

Sydbank A/S economist Peter Bojsen Jakobsen said the news will increase the probability that Denmark will see a period of deflation. He noted that this could prove a positive thing for consumer demand, and is testament to the fact growth is lower than normal.

Denmark has seen house prices fall by around 20 per cent since peaking in 2007 and has suffered from the global financial crisis more than any other Scandinavian nation. Record household debt has led to consumers cutting back their spending, which accounts for around 50 per cent of the country’s 355bn economy.

Furthermore, after contracting by 0.6 per cent in the final quarter of last year, GDP stagnated in the first quarter of 2013, according to the statistics office.

Nordea Markets chief economist Helge Pederson said the economic activity in Denmark and further afield is modest, meaning it is difficult for companies to increase prices.