Inflation rate down to 4.6 percent in July

Besides the general increase in prices, CBS also computes the monthly mean fluctuations in prices, excluding energy (such as gas, electricity, and heating) and motor fuel costs. If we leave out these factors, inflation would have stood at 6.8 percent, a drop from the 7.2 percent recorded in June.

Every month, we calculate inflation by comparing the consumer price index (CPI) to the previous year's CPI for that month. The CPI gives us an idea of how the prices of goods and services bought by Dutch households have changed over time. If the inflation rate for July 2023 is 4.6 percent, it means that consumer products were 4.6 percent more expensive than they were in July 2022. It's important to note that this 4.6-percent inflation in July does not add to the 5.7-percent inflation rate from June.

Energy Prices Drive Down Inflation

The drop in inflation was primarily caused by the fluctuations in energy costs (including electricity, gas, and district heating). Energy prices have been consistently declining since January. In July, energy prices were 34.5 percent lower compared to the previous year. Similarly, prices in June witnessed a 19.1 percent reduction compared to the same month in the previous year.

Revolutionary Way To Gauge Energy Costs

Starting in June 2023, CBS has implemented a fresh approach to gauge energy costs and integrate them into the CPI. This alteration in methodology has an impact on the inflation rate. On the last day of June, CBS released an informative article shedding light on the implications of this transition for the CPI, inflation rate, and the utilization of the CPI for indexing intentions.

Lower Prices For Clothing And Food

The fluctuations in the costs of attire and nourishment additionally had a negative impact on the progression of inflation. Attire experienced a 5.5 percent price hike in July compared to the same time last year, whereas in June it rose by 10.5 percent. The yearly increase in food prices decreased from 13.1 percent in June to 11.7 percent in July. The decline in dairy prices played a significant role in this decrease.

Slight Rise In Rent Property Rates

The decline in inflation is also a result of the growth in rental property rates. According to initial data, rental property rates rose by 2.1 percent in July 2023 when compared to the previous year. This rise is not as significant as the one observed in July 2022, where the average increase in rental property rates stood at 3.0 percent.

The progression of rental costs varies among tenants. The highest allowed hike in rent relies on the rental category (controlled or unrestricted) and income level. In 2023, individuals with low incomes may qualify for a decrease in rent if specific criteria are met.

Rising Costs: Fuel & Park Prices Drive Inflation

Starting from 1 July 2023, the taxes imposed on motor fuels have been increased. This has caused inflation to rise. While the cost of motor fuels was 11.1% lower in July 2023 compared to July 2022, there was a significant decrease of 23.2% in June 2023. The rise in taxes for petrol, diesel, and LPG in July 2023 was preceded by a reduction in rates starting from April 2022. Alongside motor fuels, the prices of holiday park accommodations also contributed to the inflation increase.

Short-term Price Trends

Each month, CBS provides updates on inflation by comparing the CPI to the previous year. Nevertheless, this statistic does not offer insights into the price changes that occurred throughout the twelve-month period. The CPI can also be utilized to determine the average price changes compared to the previous month. In July 2023, consumer prices increased by 1.0 percent compared to June. The price level reached its peak in October 2022 over the past twelve months.

By the way, it's important to consider seasonal factors when comparing with the previous month. For instance, the cost of airline tickets tends to be higher during holiday months in comparison to months outside the holiday season. During that time, prices rise temporarily, but it's not a permanent price increase. Because of these seasonal effects, month-to-month trends often experience greater fluctuations than year-to-year trends.

Drop In Eurozone Inflation

From 1996 onwards, CBS has provided information on two distinct measures of inflation: one utilizing the Consumer Price Index (CPI) and the other utilizing the Harmonised Index of Consumer Prices (HICP). As per the European HICP data, the cost of consumer goods and services in the Netherlands experienced a 5.3 percent increase in July compared to the same period last year. This marks a decline from the 6.4 percent inflation rate observed in June. Inflation within the euro area also witnessed a decrease from 5.5 percent in June to 5.3 percent in July.

CPI Versus HICP: Spot The Variation

To make it easier to compare countries, European Union member nations compute a consumer price index based on globally standardized definitions and approaches. The European Central Bank relies on this HICP to shape its monetary strategies within the eurozone. Furthermore, the majority of countries generate their own domestic consumer price index.

The primary conceptual distinction between the CPI and HICP in the Netherlands lies in the fact that the HICP does not consider the expenses associated with owning a home, unlike the CPI. In the Dutch CPI, these expenses are computed based on changes in rental property prices. The disparities are elaborated on in the article titled Variations in consumer price indicators.