High energy prices push Dutch inflation to 3.5% in May

Daily life in the Netherlands became 3.5 percent more expensive in May than a year earlier, Statistics Netherlands (CBS) reported based on a quick estimate. Inflation has thus increased significantly compared to the 2.8 percent in April, mostly due to high energy prices.

The war in the Middle East, which started in late February, has increased oil and gas prices sharply over the past three months. Economists fear that a prolonged conflict will push inflation higher due to higher energy prices. In February, before the United States and Israel bombed Iran and started this war, inflation stood at 2.4 percent.

The prices of energy and motor fuels rose by 9.9 percent in May, following an increase of 7.9 percent in April. Food, beverages, and tobacco became 0.4 percent more expensive, following a price increase of 1.5 percent in April. Prices in the service sector rose by 4.7 percent, compared to 3.6 percent a month earlier. And Industrial goods became 0.7 percent more expensive, after a 0.3 percent increase in April.

Compared to April, consumer prices rose by 0.1 percent in May. CBS adds the caveat that temporary seasonal influences can be significant in month-to-month comparisons. For example, with clothing that is put on sale, the markdowns do not constitute a permanent price decrease.

Based on the European measurement method, inflation in the Netherlands climbed to 3.4 percent last month, compared to 2.5 percent in April. The method agreed upon within the European Union does not take into account the costs of owning a home. The Dutch method does include these costs.

Later this morning, the European statistics office Eurostat will release preliminary figures on consumer prices in the eurozone for May. In April, inflation in the euro area rose to 3 percent, from 2.6 percent in March. In February, before the Iran war, inflation stood at 1.9 percent.

Economists expect that inflation in the eurozone increased to 3.2 percent in May. Inflation is, therefore, well above the European Central Bank’s (ECB) target of around 2 percent. The ECB will meet next week to discuss interest rates and will likely raise borrowing costs to combat inflation.