Inflation rate in 2004 lowest since 1989

06/01/2005 08:30

According to the latest consumer price index (CPI) published by Statistics Netherlands, the average inflation rate in the Netherlands in 2004 was 1.2 percent, a record low since 1989. The low rate is mainly caused by falling prices for food and drinks. The inflation rate according to the European harmonised method (HICP) averaged 1.4 percent in 2004.

Reduced food prices contribute significantly to low inflation rate

The inflation rate for 1989 averaged 1.1 percent. In the following period until 2004 the average inflation rate was continually at 2.0 percent or higher. The inflation rate peaked in 2001, when prices were 4.5 percent up on one year previously. In 2004 the inflation rate was 1.2 percent, well below the average level in the period 1990-2003.

The low inflation rate can largely be attributed to low prices for food and soft drinks. The price war in the supermarkets was partly accountable for an average price drop by 3.5 percent for these products compared to 2003. Prices for alcoholic drinks were almost 3 percent below the 2003 level.

Prices for furnishings and household appliances also dropped by almost 1 percent in 2004 compared to twelve months previously. The same applied to goods and services in the sector culture and recreation. Prices of audio and video equipment, computers and software went down by almost 11 percent. Clothes and footwear were 1.9 percent cheaper than one year ago. In 2003 the prices for these products had already fallen by 3.0 percent.

Tobacco and petrol prices substantially up in 2004

Not all product groups contributed to the low inflation rate in 2004. The prices for tobacco products, for instance, rose by an average 16.1 percent compared to 2003 and motorists faced an average price increase of 7.9 percent for car fuels. The rates for consumption-related taxes and public services were on average 5.2 percent up on 2003. These include property tax, sewerage charges, pollution tax, road tax and municipal services. Home care and child care were on average 9.5 percent more expensive.

Rents rose by more than 3 percent in 2004 compared to 2003. The average price increase for gas and electricity was 3.5 percent. This is the smallest energy price increase since 1999, nevertheless well above the average inflation rate in 2004.

Inflation rate in December marginally lower than in November

The inflation rate in December 2004 was 1.2 percent, whereas in November it was 1.3 percent. This is mainly due to lower prices for clothes and footwear. A price drop from November on December is common for these products but the drop in December 2004 is much more substantial than in December 2003. In December last year the prices of clothes and shoes were 4.6 percent below the level of December 2003. Between November 2003 and November 2004 prices for these products dropped by only 1.0 percent.

Prices of car fuels fell significantly in December compared to the previous month thus pushing down the inflation rate. In December car fuel prices were 7.4 percent up on twelve months ago but in November 2004 they were 11.3 percent higher than in November 2003.

Fresh vegetables, on the other hand, became much more expensive (11.3 percent) in December 2004 compared to December 2003. In November vegetable prices were still 10.1 percent lower than in November 2003.

Inflation rate in 2004 according to the European standards 1.4 percent

The average Dutch inflation rate according to the European standards amounted to 1.4 percent in 2004. So the inflation rate in 2004 according to the HICP was higher than the inflation rate according to the national CPI. The reason for this is a different approach of the costs for health care in both series.

The harmonised inflation in the Netherlands fell from 1.5 percent in November to 1.2 percent in December. Eurostat, the European statistical bureau, expects the inflation rate in the Eurozone over December to be at 2.3 percent .

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