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Inflation in the Netherlands returned in November 2023, with the average price level 1.4% higher than a year earlier. This marks a shift from the deflation in October, as reported by Statistics Netherlands (CBS). Inflation according to the European Harmonised Index of Consumer Prices (HICP) was previously negative, falling by 1% in October. However, in November, the consumer price index (CPI) showed an increase of 1.6% year-on-year. These figures include an estimate for the cost of owning a home and are influenced by seasonal variations.
Recent inflation figures have been strongly influenced by fluctuations in energy prices. In November, energy costs, including petrol and diesel, were 25% lower than a year earlier, down from the 40% drop in October. Excluding the energy component, the CPI increase was 4.1%, down 5.1% from October. Rabobank experts interpret the increase as a statistical phenomenon and not an indication of a long-term trend. They expect that, without a new energy crisis, inflation will normalize. The bank forecasts HICP inflation of 3.5% for the coming year, with a decline in 2024 due to stabilising food prices. Recently, we spoke Nout Wellink, former President of the Dutch Central Bank, in the Holland Gold podcast. Wellink indicated in this podcast that the time of low inflation is over. He expect higher inflation in the near future as a result of demography, deglobalisation and climate action.
The European Central Bank (ECB) faces the challenge of determining how long interest rates should remain elevated to stabilize inflation. Wage growth plays a crucial role in this, and controlled growth can help to avoid a wage-price spiral. This is important in view of the current recession and deteriorating economic indicators. Dutch gas stocks are up to standard, and a significant decrease in gas consumption has been observed, partly due to more efficient installations and insulation. This contributes to the stabilisation of energy costs.
CBS has adjusted its methodology for calculating the energy component in the inflation figures, which has led to a lower estimate of inflation. However, these figures are considered by some to be biased, as they are based on actual prices paid rather than prices for new contracts. As inflation in the Netherlands recovers from recent deflation, the economic outlook remains complex, with fluctuating energy prices and challenges for monetary policymakers. Previously, high inflation led to a Flight to gold and silver. The question now is to what extent inflation will rise again, given the ongoing geopolitical turmoil and the deglobalisation trend that has begun.
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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
Source: Financieel Dagblad
Author: Marijn Jongsma
