Inflation in the Netherlands cooled to 2.7 percent in April. The Central Bureau of Statistics (CBS) reports this in a quick estimate. This meant that inflation was lower than in March. Then daily life became 3.1 percent more expensive compared to a year earlier. In February inflation was still 2.8 percent. “A disappointment,” says BNR’s in-house economist Han de Jong. “I thought it would be 2.5 percent and I was hoping for something lower.”
Inflation cools down again to 2.7 percent in April, decline in services prices ‘striking’
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According to the statistics agency, this decrease was mainly because energy prices and prices of services have fallen again, says Peter Hein van Mulligen, chief economist at Statistics Netherlands. ‘On balance, this had a decreasing effect on inflation.’ He does mention that there is no question of a gigantic decline. “It’s fairly stable, we’ve been around four percent all year.” Prices in the supermarket did rise slightly again last month.
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The 2.7 percent inflation rate is a year-over-year comparison. De Jong points out that prices increased by 0.6 percent in April compared to March. “That’s quite a lot,” he thinks. ‘In the first four months of this year, i.e. April compared to December, prices increased by 2.3 percent. These types of figures are not seasonally adjusted, so you have to be a little careful with the interpretation, but that is still a fairly significant price increase in the first four months. That’s a bit disappointing to me.’
De Jong also thinks that the fact that food prices rose again in April is a disappointment. ‘That was still 2.8 percent in March and has accelerated to 3.2 percent. There was some moderation in the inflation rate for the other three components.’ In Belgium’s inflation figures, which were published yesterday, food inflation had actually fallen considerably.
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Van Mulligen of CBS calls the fact that services prices are lower again in April ‘remarkable’, because wages have actually risen considerably. ‘The price development of services is largely determined by wage developments. Certainly in the second half of last year, but also in the first months of this year, we saw that wages were still rising very quickly, but that is not immediately reflected in a huge increase in the price of services. It is still around 4 percent, while wages rose by around 7 percent.’
Finger on the pulse
Inflation has been cooling down in the entire Eurozone for some time, but Van Mulligen expects that the European Central Bank will keep its finger on the pulse for a while and will not yet introduce interest rate cuts. ‘The figures for April are not yet known, but for March you also saw that inflation for the Eurozone as a whole was still well above 2 percent. In that respect, the ECB will still be reluctant to cut interest rates.’
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Klaas Knot, president of De Nederlandsche Bank, said in an interview yesterday that the European Central Bank must be cautious in new interest rate steps after the most likely interest rate drop in June. “I get the impression that there are quite different views within the ECB about where interest rates should go,” says De Jong. ‘Knot is quite traditional and does not want to lower interest rates too quickly, but there are other members of the policy committee who are in favor of it.’
European figure
The European statistical agency Eurostat will also release a preliminary estimate of inflation in the euro zone in April later today. Inflation in the euro area was 2.4 percent in March, compared to 2.6 percent in February.
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