Dutch inflation nearly lowest in EU

04/05/2011 15:00

The Dutch inflation rate in March 20100 was one of the lowest in the EU. Only in  Ireland, Sweden and the Czech Republic was inflation lower. The difference with average inflation in the EU is mainly caused by prices changes for energy and foodstuffs. The Netherlands has had one of the lowest rates of inflation in the EU for years now. Tax measures have less effect on price developments in the Netherlands than on average in the EU.

Inflation March 2011 (HICP)

Inflation March 2011 (HICP)

Energy accounts for most of difference

In March 2011 inflation in the EU was 3.1 percent. In the Netherlands it was 2.0 percent. The difference between Dutch inflation and the average inflation in the EU is mainly accounted for by developments in energy prices. Energy companies in the Netherlands mostly adjust their prices in January and in July. In other countries energy prices react more quickly to developments in oil prices.

In addition, in the rest of the EU households use more domestic fuel oils than in the Netherlands. And it is precisely for these products that prices have risen substantially.

Food prices up by more in EU

The increase in food prices was larger in the rest of the EU than in the Netherlands. In eastern Europe, in particular, these prices have risen substantially. Also, Europeans spend more on food than the Dutch. As a result an increase in prices of food and non-alcoholic drinks has a stronger upward effect on inflation in the EU than in the Netherlands.

Food prices

Food prices

Tax measures affect prices less than in EU

Dutch prices were 7.7 percent higher in December 2010 than fives years previously. Changes in excise rates and other tax measures accounted for 0.7 of a percentage point of this price increase. In other EU countries tax increases accounted for more of the price increase, especially in eastern Europe. Romania beat everyone in this respect: more than 12 percentage points of the total price increase of 35 percent were accounted for by tax measures.

Effect of tax measures on prices, December 2010 versus December 2005 1)

Effect of tax measures on prices, December 2010 versus December 2005 1)

Koen Link