Inflation rate rose to 1.6 percent in January

Impact of electricity price drop in January 2020 has worn off

In January 2021, the price development of electricity had an upward effect on inflation. This is because a substantial electricity price drop that took place in January last year no longer has any effect on inflation figures. Although in January 2021 electricity was 9.1 percent cheaper year-on-year, the price drop was much more modest than in December, when it was almost 40 percent. A greater energy tax reduction was implemented in both January 2020 and January 2021. This reduction was applied to the electricity bill (per connection), resulting in lower electricity prices.

The price development of natural gas, on the other hand, had a downward effect on inflation. In January, natural gas was 2.3 percent cheaper than one year previously, against a year-on-year rise of 3.4 percent in December. Although taxes on natural gas were raised in January, delivery rates were considerably lower than one year previously, resulting in an overall price decline of natural gas.

On balance, the price developments of electricity and natural gas had an upward effect on inflation. More information on the energy bill will be published by CBS on 19 February 2021.

Changed consumption pattern affects inflation in 2021

As a result of the coronavirus crisis, consumer spending patterns have changed drastically. Following Eurostat’s guidelines, the 2020 spending pattern has been set as guiding for the weightings in the basket for the consumer price index in 2021. Due to changes in consumption, certain product groups have increased in importance and weight while for other groups this has declined (sometimes considerably). For example, airline tickets and package tours have a considerably smaller weight in 2021. This weighting change has affected the consumer price index and the resulting inflation rate.

Especially those weighting changes that apply to products and services with major price changes, for example as a result of strong seasonal effects, can have a profound effect. For airline tickets and package tours, January is the low season, in which price levels are low compared to other months of the year. In this case, the lower weightings have an upward effect on the inflation rate as the price drop has less impact than in the previous year.

Inflation in eurozone positive again

Aside from the consumer price index (CPI), CBS also calculates the European harmonised index of consumer prices (HICP). In January, HICP-based prices of goods and services in the Netherlands were 1.6 percent up year-on-year. This was still 0.9 percent in December. The inflation rate in the eurozone increased from -0.3 percent in December to 0.9 percent in January. It’s the first time since August 2020 that inflation in the eurozone is positive. 

The HICP is compiled according to the European harmonised method in order to facilitate comparison between the various EU member states. Price indices for the eurozone and the European Union as a whole are calculated on the basis of the HICPs of the individual member states. The European Central Bank (ECB) uses these figures to formulate its monetary policy.

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 developments in rental property prices.

Implications of the coronavirus crisis for consumer price measurements in January

Due to coronavirus-related government measures, in January the extent of services by e.g. airlines and restaurants was either limited or unavailable. As a consequence, for many of these services there were no transactions that allowed for price measurements. In line with guidelines from Eurostat, the statistical office of the European Union, CBS has chosen the most appropriate estimation method in each situation. The product groups that required price estimates due to the coronavirus measures account for around 7 percent of consumptive expenditure.