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Denmark has lowest price increase in over 50 years

Newly-released figures from Statistics Denmark reveal that the national consumer price index has barely moved over the past year.

Denmark has lowest price increase in over 50 years
Service prices increased slightly while the price of goods fell. Photo: Colourbox
Prices for services like rent, bank fees and insurance increased just a combined 1.3 percent from September 2015 to September 2016, something not seen for decades. 
 
“It is the lowest increase in service prices in over 50 years,” Statistics Denmark wrote
 
The price of goods – including food, clothing, petrol and electronics – decreased by 1.4 percent over the past year, while the overall consumer price index did not increase at all between August and September. 
 
The was brought down by lower rental prices for summer homes and the falling cost of meat and furniture. Rental prices on year-round homes, however, increased by 20 percent in September 2016 when compared to the same month last year. 
 
According to Nykredit economist Tore Strammer, the tepid increase in goods and services prices comes as salaries in the private sector increased by 2.2 percent in the same period. The bank calculated that the average Danish family can end each month with an extra 560 kroner in their pockets. 
 
While Danes, who pay more than anyone else in the EU for food and non-alcoholic drinks, might cheer the news that the prices have stagnated, an economist with the Danish Confederation of Enterprise (Dansk Erhverv) told news agency Ritzau that the low inflation is a sign that the Danish economy still hasn't fully recovered from the global financial crisis. 
 

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COST OF LIVING

EXPLAINED: Why is Switzerland so expensive?

That the cost of living in Switzerland is notoriously high is hardly a surprise — though it may still shock some people. There are several reasons why this is so.

EXPLAINED: Why is Switzerland so expensive?
Life in Switzerland is expensive. Photo by Claudio Schwartz, Unsplash

Besides chocolate, cheese and banks full of other people’s money, Switzerland is perhaps best known for being expensive. 

The country is especially pricey when it comes to food, beverages, hotels, housing, restaurants, clothing, and health insurance – or pretty much everything you need. 

While Switzerland is expensive for its residents, for people coming from abroad, high costs here are the ultimate culture shock.

READ MORE: Why Zurich ranks as the world’s most expensive city once again

Various studies have shown time and again that Swiss consumers pay much more for basic goods and services than their European counterparts, with the exception of Norway and Iceland.

For instance, one such study found that people in Switzerland have to pay 168 francs for a basket of consumer goods costing on average 100 euros in the EU.

Why is this?

Many reasons have been given to explain this phenomenon. Some of them however are based on popular beliefs rather than economic facts.

One such explanation that is making rounds in Switzerland is that prices in Swiss supermarkets are high because employees in Swiss supermarkets are paid more than their European counterparts.

While Swiss salaries are indeed higher than almost anywhere else in Europe, this explanation does not hold water.

Cost of living in Switzerland: How to save money if you live in Zurich

So what is the real reason for the high cost of consumer goods in Switzerland?

Among the most often cited ones are protectionism and lack of competition, which are inter-related, as the former invariably leads to the latter.

Trade protectionism is a policy that protects domestic industries from foreign competition.

A case in point is milk.

Milk can only be imported if it is in short supply in Switzerland, which is not currently the case. This means that Swiss milk has no foreign competitors vying for the consumers’ attention, and forcing it to lower its price.

This kind of protectionism extends to many other products as well.

But sometimes it works the other way too.

study by the University of Applied Sciences of Northwestern Switzerland shows that foreign producers and suppliers impose large price increases in Switzerland, exploiting high salaries and consumers’ purchasing power.

This means that Swiss buyers are overpaying for their purchases by more than three billion francs, the study found. 

This is the reason why so many people living in border regions go shopping in France, Italy, and Germany, where the same items are considerably cheaper. 

Cross-border shopping: Vaccinated Swiss can now shop in Germany again

This practice is widespread in e-commerce as well.

Anyone who wants to order something online from a foreign store is often redirected to the supplier’s Swiss site, where the prices are often much higher.

This is called ‘geo-blocking’.

This practice finally spurred the public and politicians into action.

READ MORE: ‘Fair prices’: Switzerland moves one step closer to referendum on cost of living

A popular initiative tag-lined “Stop the expensive island” , which aims to fight against overpriced goods in Switzerland, was presented to the parliament in 2017.

It has been stagnating there for four years because PMs couldn’t agree on how to tackle this issue.

But in March, the initiative was revived and is heading toward a referendum (no date has been set yet).

If passed, geo-blocking’ will be prohibited. In the future, consumers and businesses based in Switzerland will have to be treated by foreign online shops the same way as domestic consumers

It is difficult to predict whether Swiss prices will drop significantly as a result of this initiative, but at least there is hope on the horizon.

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