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Danish businesses benefit from waning price increases

Higher costs for business caused by inflation are declining, in a trend that could bolster the Danish economy.

Published: 17 April 2023 15:53 CEST

Danish businesses benefit from waning price increases

File photo of a Danish power plant. Falling energy prices are reducing overheads for businesses, and consumers could eventually benefit. Photo: Liselotte Sabroe/Ritzau Scanpix

Energy costs in particular are trending downwards, allowing Danish companies to keep costs under control and strengthen their positions, news wire Ritzau reports based on data from Statistics Denmark.

March saw prices up by 3.8 percent compared with the same month a year earlier. The same metric in February was considerably higher, at 8.3 percent.

The figures represent the trend in prices charged by producers of goods and services when they do business with each other.

The price of energy fell by 36.1 on an annual basis in March, Statistics Denmark reports.

READ ALSO: Lower energy prices take air out of Danish inflation

Declining costs for businesses remove some of the pressure faced by companies during the period of inflation seen in 2022, and can also give a clue to how consumer prices will look in the longer term, according to trade union Dansk Metal’s senior economist Erik Bjørsted.

“Energy prices, raw material costs and transport rates have fallen strongly and gas stores are still well stocked. That gives well-founded hope that inflation will continue to decline in the near future,” he said in a written comment.

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Better-than-expected Danish economy frees up 11 billion kroner for budget

“The long and the short of it is that the Danish economy is rock solid,” Nicolai Wammen told Denmark’s Ritzau newswire after the announcement. “But we also live in a world of great uncertainty: it is important to remember that only a year and a half ago we had the highest inflation in 40 years.”

Wammen said that better-than-expected employment figures had pushed the ministry to adjust its estimate of its spending leeway under Denmark fiscal rules by 11.25 billion kroner between 2024 and 2030. As a result, he said, he planned to earmark an addition 4.1 billion kroner for public spending in 2025.

“Over 3 million are in employment, and the progress in employment has been particularly high in the private sector,” he said in a press release. “At the same time, unemployment is low.”

He pointed to the increase in the number of labour migrants coming to Denmark as a result of the government’s policies, adding that more reforms would be needed in future to increase the labour supply due to a demographic situation which meant the country was about to see a larger number of people retiring than coming into the system.

“With the reforms that have been implemented and are underway, the government has increased the labor supply by 29,000 full-time workers in 2030. The government aims to increase the labor supply by 45,000 full-time workers,” he said.

The increased spending leeway, he said, would make it easier for the government to take Denmark through some of the major changes it needs to make in the coming years.

“This gives us an even stronger foundation for handling the challenges we face. At the same time, we must also continue to be aware that we still need more hands and minds in both the public and private sectors if we are to ensure growth, welfare, green transition and our security in Denmark, among other things,” he said.

Wammen told the public broadcaster TV2 that much of the extra money would be used to increase funding to municipalities and the regional governments who run Denmark’s healthcare system.

But also warned that it was important that the government does not shift to a more expansive economic policy that breathed life back into inflation.

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