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Denmark’s inflation rate hits a 37-year high and could ‘only get worse’ says Dankse Bank

Dino Kurbegovic

Danish millennials are experiencing inflation that hasn’t been seen at these levels for 37 years. After steadily increasing by 2% a year, inflation is now at an abysmal 5.4% in March, the highest level since 1985.  

Inflation in Denmark hasn’t peaked yet and it can presumably get worse as per the senior analyst at Danske Bank A/S, Bjorn Tangaa Sillemann’s note to clients. The country is still experiencing wage growth and there is demand abroad for Danish products, for the time being. 

Noteworthy is that although inflation has been steadily rising since 2021, it has accelerated in recent months as a result of the conflict in Ukraine, which has led to a knock-on effect on commodity and food prices.

Source: TradingEconomics

Belt-tightening measures for all

Denmark outperformed their peers during the Pandemic lockdown, however, inflation is now being fueled by energy and wage pressure stemming from labor shortages. Electricity contributed a 1% rise in inflation and fuel added another 0.8% as per Statistic Denmark

“It’s absolutely crucial how much you drive a car and how you heat your home,” Sillemann said. “In particular, diesel cars were very expensive to drive in March, after prices rose 17%, the largest monthly price increase to date.”

The worst-case scenarios include raging inflation to above 5.5% levels spurred on by a loss of business confidence, worsening investment climate, and weakening of the consumers buying power. This would represent stagflation which could become a reality with oil and gas flows from Russia being tapered down by EU and partner countries. 

Source: DanskeResearch

How inflationary pressure will affect the richest countries which have strong consumers is still an unknown. Poor countries whose household income is usually eaten up by groceries and utility bills will most certainly feel the inflationary squeeze. 

If energy prices come down there is a possibility to avoid worse case scenarios, and the entire world is hoping to avoid stagflation.  

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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