Dutch inflation came in stronger than expected and diverges from eurozone
September inflation (CPI) for the Netherlands came in this morning at 3.6% y/y, up again from 3.5% in September. Compared to the same month last year, food prices are higher (6% y/y) mostly due to policy changes such as the excise duty hike on tobacco which was implemented from April this year, as well as a ‘sugar tax’ on non-alcoholic beverages and higher excise duties on alcoholic beverages.
Similarly, industrial good prices rose again (0.5% y/y). We think that price pressures in the industrial sector are fading, given the weaker goods demand we see in the broader eurozone. Generally, Dutch inflation remains a services story, driven by a higher housing rent indexation in July of this year and still elevated wage growth which affects primarily the labour-intensive services.
Inflation in the Netherlands has been higher compared to the rest of the eurozone for a number of reasons, such as higher wage growth as well as a stronger labour market. As wage growth in the Netherlands is still elevated, we expect Dutch inflation to continue to outpace the eurozone in 2025 as well, potentially creating risks to competitiveness.