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Inflation in Denmark drops to less than 1 percent

Inflation in Denmark fell to 0.9 percent in Denmark, the lowest level for almost three years.

Published: 10 October 2023 15:37 CEST

Inflation in Denmark drops to less than 1 percent

Inflation is under 1 percent for the first time since early 2021. Photo: Kristian Djurhuus/Ritzau Scanpix

New figures released on Tuesday by Statistics Denmark rate the country’s inflation at its lowest level since February 2021, predating the energy crisis and price rises that were a major factor throughout 2022.

Inflation has almost consistently fallen since October last year, when in peaked at 10.1 percent.

The announcement comes after Statistics Denmark said last month that Denmark had the lowest inflation in the EU.

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The latest figure is positive news, private economist with Arbejdernes Landsbank, Brian Friis Helmer, said in a comment to broadcaster TV2.

“It’s quite simply good news that inflation and core inflation are falling back from the extremely high levels we’ve seen over the last year,” he said.

Core inflation is a measure that does not take into account energy and unprocessed food prices and demonstrates the presence of inflation in other parts of the economy.

It fell to 3.7 percent in September, down from 4.2 percent the previous month and the lowest since April 2022.

Although some stores including supermarkets have begun to reduce prices, falling inflation does not automatically translate to immediate consumer savings, Helmer warned.

“But Danes can possibly look forward to some of their costs getting a little cheaper again,” he said.

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Explained: Why Denmark's economy is looking in such extremely good shape

“When I stood here a year ago and presented my first financial statement, it was with a message that the Danish economy was heading for a soft landing. We have since been strengthened in that assessment,” Stephanie Lose, Denmark’s economy minister, said at a press conference announcing the government’s Økonomisk Redegørelse, or financial statement, for May.

In the press statement, she said, “optimism is returning to the Danish economy”, with the economy likely to improve further in the coming year.

“We have carried out reforms that make Denmark richer and help to secure the necessary workforce for Danish companies,” she said.

How has the government changed its growth forecasts?

The government has increased its expectation for Denmark’s growth rate since its last statement in December, with it now expecting 2.7 percent growth in 2024, up from the1.4 percent it expected for the year in December.

It has also upgraded its expectations for 2025, predicting growth of 1.8 percent compared to the 1 percent it expected back in December.

Lose said that the pharmaceutical company Novo Nordisk, which is expanding rapidly as a result of the success of its weight-loss drugs Ozempic and Wegovy, had driven much of Denmark’s recent growth, with the reopening of Denmark’s gas field, the Tyra field, would start to contribute to growth soon.

“In the past two years, the pharmaceutical industry in particular has driven growth in the Danish economy, while there has been stagnation or decline in large parts of the rest of the economy,” she said. “In the coming years, other industries again look set to contribute to growth. Added to this is the reopening of the Tyra field in the North Sea, which also contributes to growth in GDP.”

What does the government expect to happen to inflation?

Denmark’s inflation rate fell rapidly from a peak of over 10 percent in October 2022 to below 2 percent in September 2023, where it has stayed ever since. But Lose said she expected the rate to edge up over the coming years.

“Inflation has fallen quickly and faster than expected,” Lose said. “In the new forecast, we expect inflation to rise in the coming months, as the prices of services and energy pull in the direction of slightly higher inflation.”

What does the government expect to happen to employment?

Thanks mainly to Novo Nordisk increasing staffing to manage the success of its new drugs, and the bounce back from the pandemic, employment has also held up better than expected.

Employment soared by some 160,000 people between 2021 and 2023, and the government now expects the number of employed people to grow by a further 13,000 in 2024 but to then fall by 18,000 in 2025.

“Employment has long been at a sky-high level, so it is estimated that we will see some adjustment. But we do not expect an extensive setback, because the Danish economy stands on a rock-solid foundation,” Lose said.

What does the government expect to happen to housing prices?

The government has significantly upgraded its expectations of what will happen to the price of domestic property this year. It now expects prices to increase by an average of 3.2 percent in 2024 and 3 percent in 2025, a rise of two percentage points on the 1.2 percent rise for 2024 it expected when it made its last forecast in December.

This is due to the continued strong labour market, which has seen rising incomes and wage increases in Denmark as a result of new collective agreements, at the same time as Denmarks Nationalbank is expected to cut interest rates.

This rise follows two consecutive years of falling real house prices in 2022 and 2023.

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