inflation down to 0.0 percent

13/02/2015 09:30

According to figures from  Statistics Netherlands, inflation fell to 0.0 percent in January, the lowest level for 27 years. In December consumer prices were still 0.7 percent higher than twelve months previously. The sharp drop in inflation was caused mainly by lower prices of car fuels and clothing.

Lowest inflation since December 1987

Inflation dropped sharply in January, to its lowest level since December 1987. Dutch inflation was negative in mid-1987, as gas prices were much lower than in the same period one year previously.  In later years, around 1991 and 2001, there were periods of higher inflation. In 1991 rent rates increased substantially, and at the beginning of the century the high VAT rate was raised. Energy tax on gas and electricity and food prices were also higher around 2001. The economic crisis contributed to the decrease in inflation in 2009.

Fuel prices substantially higher

In January 2015, inflation fell mainly as a result of car fuel prices. Oil prices fell to just under 50 dollars per barrel, and the price of petrol dropped to an average 1.47 euros per litre; petrol was nearly 13 percent cheaper than in the same month last year. Gas, too, cost less in January, and also pushed down inflation. The price of gas is now 2.8 percent lower than twelve months ago.

Higher retail discounts

Prices in clothes and food shops also tempered  inflation. The demand for winter clothes was down as a result of the mild weather. As a result, clothes were reduced by more during the sales. Supermarkets also sold products at higher discounts.

Inflation also lower without energy and food

Inflation was curbed substantially by lower energy and food prices in January 2015. As prices for energy and food are very unstable, inflation is often calculated without these two categories. Without these categories price rises in January fell from 1.4 to 1.0 percent.

Inflation in the Netherlands almost equal to eurozone

Statistics Netherlands also publishes the inflation rate calculated according to the harmonised European method (HICP), so that it can be compared with the rates in other countries. One important difference between the HICP and the national inflation rate calculated in the Netherlands is that the HICP does not take into account costs connected with an own home.
Dutch inflation according to the HICP fell heftily for January, to -0.7 percent, the lowest level since the start of the HICP in 1997. Inflation in the eurozone fell to -0.6 percent in January. Inflation in the Netherlands is thus almost at the same level as in the eurozone.
For the European Central Bank (ECB) the level of inflation in the eurozone is an important indicator to set interest rates. According to the ECB, inflation below but close to 2 percent denotes price stability.