Inflation rate historically low in 2006

11/01/2007 09:30

The  inflation rate over 2006 averaged 1.1 percent, unprecedented since 1989. The low figure for 2006 is mainly due to lower goverment rates and a more modest increase in energy prices compared to 2005, when inflation was 1.7 percent, according to the consumer price index published by Statistics Netherlands.

Lower government rates push down inflation

The inflation rate over 2006 settled at the lowest level since 1989. With 1.1 percent, the average price increase remained under 2 percent for the third year running. The rates of consumer-related taxes and government services pushed down inflation by 0.5 percentage points in 2006. The abolition of the user component of property tax helped to temper inflation.

Excise duty on spirits was reduced and the parental contribution to child care costs was lowered. Prices of audio, video and communication equipment, computers, insurances and financial services were also below the level of 2005.  

Energy prices main cause of inflation

The price increase of electricity and gas was more modest in 2006 than in the preceding year. The same applies to the price of petrol, especially after a substantial price cut in September 2006.

All the same, price developments in the energy sector contributed significantly to inflation in 2006. Energy products accounted for a contribution by nearly 0.7 percentage points to the average inflation rate in 2006, as against 1.0 percentage points in 2005. 

Food and clothes more expensive

After several years, when prices of food products, soft drinks, clothes and shoes decreased, they went up again in 2006. The prices of food products and soft drinks increased by 1.4 and 4.8 percent respectively, relative to one year ago. Prices of clothes and shoes rose by 0.5 percent in 2006.

Inflation rate 1.7 percent in 2006 according to the European method

Dutch inflation according to the European harmonised calculation method (HICP) averaged 1.7 percent in 2006, slightly higher than in the two preceding years. The difference between the national CPI and the HICP is largely due to the fact that consumer-related taxes are outside the scope of the HICP. That is why the abolition of the user component of property tax does not affect the HICP.

Inflation rate in December marginally higher than in November

In December 2006, the inflation rate averaged 1.1 percent, marginally higher than in November, when it was 1.0 percent. The increase is mainly caused by higher prices for petrol, flowers and plants.

Dutch inflation according to the harmonised index rose from 1.6 percent in November to 1.7 percent in December. A provisional estimate by Eurostat indicates that December’s inflation rate in the eurozone was stable at 1.9 percent.

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