May holiday creates inflation peak

04/06/2015 15:00

Statistics Netherlands reported today that Dutch inflation in terms of the consumer price index (CPI) rose to 1.1 percent in May, i.e. the highest level in the last 7 months.  The price increase in April was 0.6 percent.

Inflation according to the European harmonised price index (HICP) - used to formulate the monetary policy of the European Central Bank (ECB) - rose to 0.7 percent in May, i.e. 0.7 percentage points higher than in April.

Price developments for holiday trips and airline tickets drive up inflation

Holiday trips, airline tickets and holiday accommodations almost entirely account for the substantial inflation increase in May. Because Whit Sunday and Whit Monday were in May in 2015 and in June in 2014, more people went on holiday in May this year. The higher demand for holiday trips and airline tickets during the holiday period forced prices up. In this case, the higher inflation rate is coincidental rather than structural.

Inflation (CPI) and price developments underlying clusters

Inflation excluding energy, food, alcohol and tobacco up to 1.8 percent

As price developments for energy <<toelichting>> and food products tend to vary considerably and excise duties on food, alcohol and tobacco products are often raised, inflation is also measured without these product groups. Inflation calculated in this manner rose by 0.7 percentage points to 1.8 percent in May, i.e. 0.7 percentage points up from the CPI inflation rate.

Inflation

Inflation rate in the Netherlands above eurozone level

The HICP is calculated in accordance with the European harmonised method to facilitate comparison with other member states of the European Union. The price indices for the eurozone and the EU as a whole are calculated on the basis of the HICPs of the individual member states.

Dutch inflation according to the HICP rose to 0.7 percent in May and thus is above the average rate across the Eurozone where inflation rose to 0.3 percent. In April, the HICP inflation rate in the Netherlands and the eurozone was 0.0 percent.

Unlike the CPI, the HICP does not take into account the costs related to home ownership. In the Dutch CPI, these costs are calculated on the basis of rent levels. As rent increases were quite substantial last year, inflation in terms of the HICP is currently lower than inflation calculated according to the Dutch national method.