Economists not alarmed by rising inflation in the Netherlands; No new peak feared

Economists at ABN Amro and RaboResearch said they were not alarmed by the rise in inflation in January, and they do not think that prices will again rise as quickly as they did at the peak about a year and a half ago. Earlier on Thursday, Statistics Netherlands (CBS) reported in a preliminary estimate that annual Dutch inflation had increased to 3.2 percent in January, from 1.2 percent in December. Economists Jan-Paul van de Kerke and Hugo Erken expect price increases to be lower in the coming period.

According to the economists, it was to be expected that inflation would be higher than in December. This is due to the development of energy prices on an annual basis. In December 2023, energy seemed to be much cheaper on an annual basis, because the temporary energy price ceiling had not taken effect in December 2022. But last month, energy was not as cheap on an annual basis because the price cap took effect on January 1, 2023.

Van de Kerke and Erken both indicated they expect inflation to average 2.6 percent this year. According to Van de Kerke, this is mainly due to a decline in the prices of goods and food.

"We are seeing from the chains that price increases are slowing down, because raw material prices have somewhat fallen. Economic demand has also fallen somewhat, and as a result, companies are less able to pass on price increases," explained the ABN Amro economist. Consumers are noticing that the prices of groceries are not rising as fast as they had been, he added.

Erken of RaboResearch predicted that food prices will not increase as quickly this month than in January. He said he expects price increases to decline towards 0.4 percent by the middle of this year. He pointed out that milk has already become cheaper, while soft drinks have become more expensive.

However, inflation could be higher this year than expected if the unrest in the Middle East increases, Erken stated. For example, attacks on cargo ships in the Red Sea by Houthi rebels in Yemen have already led to higher oil prices. "If it escalates further, gas prices will also react," he warned. This market reaction has not yet taken shape, because there is little demand for gas and the stocks are full.

The European statistical office Eurostat reported earlier on Thursday that inflation in the eurozone had fallen slightly, from 2.9 percent in December to 2.8 percent in January. However, it is too early to rejoice, said ING economist Peter Vanden Houte. Energy is slowing price increases, but that effect is waning and will disappear next quarter.