Dutch inflation rate is a “fake reality,” says Rabobank economist

The inflation figure published by Statistics Netherlands on Thursday does not match what people are actually feeling at this moment, said Rabobank RaboResearch economist Hugo Erken. “It’s a fake reality.”

Provisional figures about annual inflation for August were published by Statistics Netherlands (CBS) on Thursday. According to the national statistics office, the rate at which prices are rising in the Netherlands has decreased to 3 percent. In July, prices had risen by 4.6 percent compared to the same month a year earlier.

But Rabobank calculated that inflation this month is actually 9.7 percent compared to the same month last year. The bank’s higher figure has to do with the different calculation method that CBS recently started using to estimate inflation, Erken said.

Previously, the CBS used the rates for new energy contracts to calculate inflation. But that could give a distorted picture because households do not conclude a new energy contract every month. The statistics office now also uses the rates for longer-term contracts, and is not adjusting old inflation figures to the new method.

Rabobank does compare inflation rates by adjusting figures to the new method, which came out at 9.7 percent. In September, the bank expects inflation to be slightly lower at 9.2 percent. The difference is especially significant, as inflation figures often form the basis of pricing and contracts, including wage agreements.

Food prices are among several items where prices have risen again this month. This makes low-income households even more vulnerable, Erken said. “They are now spending a larger part of their income on food and energy. The purchasing power of people with low incomes is being eroded more quickly.”

The director of budget institute Nibud, Arjan Vliegenthart, also does not view the lower inflation figure from Statistics Netherlands as providing any form of relief for people with a low income. “It’s nice that life is getting more expensive less quickly, but last year’s increases won’t be reversed,” he said. “Poverty will increase and purchasing power will decline if no new policy is introduced.”

CBS Chief Economist Peter Hein van Mulligen said in a response that research methods are constantly being improved and old figures cannot be adjusted easily. He said they could “do that with all statistics,” but in the end it would be an extensive task. Many people will have more certainty if the old figures are not adjusted, he argued.