Inflation in the Netherlands eased in July to 2.5% year-on-year, down from 2.8% in June, according to figures released by Statistics Netherlands. While the decline marks progress in tackling price pressures, economists warn that a sustained return to the European Central Bank's 2% target remains elusive, with service inflation proving "quite stubborn".
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Core inflation also edged lower, to 2.2% year-on-year. However, the Netherlands has now experienced 19 consecutive months in which headline inflation exceeded the eurozone average, which was 2.0% in July. The country continues to grapple with structural challenges including a tight labour market, housing and land shortages, and limited emission capacity.
'Services, in particular, are currently keeping the inflation rate elevated,' the report noted, with prices in the sector rising 3.1% year-on-year in July. Legal, financial, car and health insurance, vehicle repair, housing, education, childcare, and package holidays all saw increases of 4% or more, partly due to 'recent strong (albeit decelerating) wage cost rises.' Housing services alone contributed 0.4 percentage points to the overall HICP inflation rate.
The deceleration in headline inflation was driven primarily by slower price growth in clothing, accommodation services, and rental housing, alongside the fading effect of last year's sharp tobacco tax hike. Nonetheless, supply and demand pressures, combined with lingering structural bottlenecks, remain significant.
Non-energy industrial goods rose just 1.3% in price, but the balance of contributions suggests inflation will stay above target in the near term. ING forecasts headline inflation to average 2.8% in 2025, before easing more markedly in 2026—though still not dipping below 2%.
'Looking ahead, we expect headline inflation to continue to decelerate, but only for a short while,' the report stated. 'With substantial contributions from food, housing, hospitality, and other services, we continue to forecast considerable inflation of 2.8% for all of 2025. The decrease in price pressures should be more apparent in the figures for 2026, but still not be enough to bring the inflation rate below 2%.'
The persistent inflation differential between the Netherlands and the eurozone underscores the need for targeted measures addressing supply-side constraints, particularly in housing, where shortages relative to population growth are likely to keep price growth above the European average.
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