Due to cheaper oil and gas, energy prices are lower than initially expected by analysts, so inflation could also fall faster. Who writes the FD. According to macroeconomics editor Marijn Jongsma, there are several reasons for this.
For example, the balmy winter weather would save a sip of the drink, he says. “We have had a mild winter so far and, as a precaution, the gas storage facilities are expecting more severe weather conditions. And if that doesn’t happen, prices go down.’
But according to Jongsma, there’s a more important reason behind the drop in energy prices: The Dutch are holding back. “Apart from the temperatures, our consumption has also decreased significantly,” he continues. ‘No one could have imagined that a rise in prices would lead to so much economy.’
Warning
However, he warns: it’s not just because the Dutch turn on the heating less quickly and take shorter showers that consumption has decreased. “It’s very tempting to pat yourself on the back, but the decline is mostly because industries have become more energy efficient.” According to Jongsma, companies have been examining their production processes to arrive at more efficient or alternative ways of working.
Lower inflation
Due to lower energy prices, inflation will also decrease, Jongsma continues. “Both directly and indirectly. First, energy prices are a big part of calculating inflation, so if they go down you’ll see that immediately reflected in the inflation rate,” he says. ‘In addition, there are indirect effects, because companies also have higher costs. In part they compensate for it by consuming less, but in part they translate it into their final prices. They can do that as long as the economy is doing well, and it is. And in many cases a plus is probably added».
But, Jongsma points out, if energy prices stay low for a longer period, that doesn’t automatically mean it’s good news. “It also partly reflects an economy that is slowing down,” she continues. “But we can be happy that inflation is coming down.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
