No euro country is immune to price increases, but Dutch inflation changes are often more extreme than in the rest of the eurozone. Even now that is the case. Inflation also declined in the eurozone, but to a much lesser extent. It went from 10.6 percent in October to 10 percent in November.
Incidentally, the president of the European Central Bank (ECB), Christine Lagarde, suspects that inflation has not yet passed its peak this month, despite the lower price rises.
Why is the decline in the Netherlands so strong?
The provisional figures from the Central Bureau of Statistics (CBS) show that the explanation lies mainly in energy costs (but even if these are disregarded, inflation is slightly lower: 7.5 percent compared to 7.8 percent in October ). Statistics Netherlands looks at the cost price of new energy contracts every month when calculating inflation. In November it was lower than in October.
That is, in a sense, a theoretical exercise. In reality, many Dutch people still have a fixed gas or electricity contract, so their lives have not become as expensive as the inflation rate suggests.
This calculation method of Statistics Netherlands is ahead of what actually happens, CBS chief economist Peter Hein van Mulligen recently explained in de Volkskrant. ‘We take energy price changes into account immediately, so sooner than many people notice this in their own energy bill because they still have a permanent contract. If they suddenly switch to a variable contract later, they experience an enormous price increase, while the inflation rate is much lower at that time, since the more expensive energy is already largely included.’
Next year, Statistics Netherlands will switch to a new calculation method for the inflation figure, which will take more account of the energy price that the Dutch actually pay.
So life isn’t getting any less expensive?
Certainly not. The inflation rate remains positive, so purchasing power is still declining. Life will not immediately become cheaper for the average consumer. Energy inflation is calculated on the basis of new energy contracts, and prices have risen rapidly in recent months. These prices are now rising less quickly, but many consumers are faced with higher installment amounts for the first time.
In addition, food prices continue to rise. Everyone has to deal with these expenses, including citizens with a favorable permanent energy contract and those who purchase little electricity and gas. Although the unions are making strong wage demands, incomes have been lagging behind price increases for some time. In October, the average collective labor agreement wage was 3.5 percent higher than the year before. For the average Dutch person, this means that there is less and less spending space.
Does the government’s generosity play a role?
The Dutch cabinet has taken various measures to ease the pain of higher energy costs for households. For example, there is the allowance of 190 euros per household in both November and December. However, this has no consequences for the inflation rate, as Statistics Netherlands sees this donation as income support and not as a discount on energy prices.
The price ceiling, on the other hand, does have a direct influence on the price of electricity or gas supplied, and is therefore included in the inflation figure. Or better: it will be there, since the price cap only comes into effect on January 1. Economists expect inflation to fall below 10 percent in 2023 as a result of that measure.