Finance

Inflation to record high: 5.7 percent in December

This is reported by the Central Bureau of Statistics (CBS). For the full year, inflation stood at 2.7 percent. That is the largest increase since 2002, according to figures from Statistics Netherlands.

High energy prices

The fact that life is becoming more expensive at such a rapid pace is mainly due to high energy prices, such as gas, electricity and district heating.

Energy was no less than 75 percent more expensive in December than in the same month a year earlier. In November this was still more than 57 percent. This indicates that in December consumers were faced with a significant price increase for energy.

High energy prices pushed inflation to 5.2 percent in November last year compared to the same month a year earlier. Prices have not risen that fast since 1982. But in December it went even harder.

Nutrition

In addition to energy, food also became more expensive. In December, food prices were 2.6 percent above the level of the same month last year. Meat, vegetables and fruit in particular became more expensive.

Clothing and shoes, among other things, also became more expensive.

But the biggest contributor to high inflation comes from energy prices. These accounted for just over half of inflation in December.

Last week, the European Statistical Office already reported that inflation in the Netherlands in December amounted to 6.4 percent. In November this figure, which is measured slightly differently than the figure from Statistics Netherlands, was 5.6 percent.

In this video, Carien ten Have explains how it is possible that everything has become more expensive:

Ideal is inflation of about 2 percent

In an ideal situation, prices would rise by about 2 percent: that is exactly a nice balance between healthy growth of the economy, without life becoming more expensive too quickly.

Very low or no inflation is also not good, as households and companies with debts can get into trouble. The advantage for people, companies and governments with debts of a little inflation is that their debt becomes relatively smaller every year.

The amount you have in debt remains the same. But if you earn a little more, because you get a little more wages, a company can raise prices a little, or get more tax revenues, then your debt in relation to your income becomes a little less.

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