Denmark slips into deflation as oil prices drop

Stockholm (AFP) - Danish consumer prices fell in January for the first time since 1954 after energy prices collapsed, following the eurozone into negative territory while raising hopes it could boost Denmark's anaemic consumer spending.

The prices of goods and services dipped 0.1 percent in January after rising 0.3 percent the month before, the national statistics office said.

Stripping out the cost of energy and non-processed food, prices rose 0.8 percent.

"It is worth underscoring that the current situation is good news for the Danish economy," Nordea economist Jan Stoerup Nielsen wrote in a note to investors.

"As long as lower inflation is due to falling energy prices and fees it is helping to support the purchasing power of Danish households," he said.

Danish consumers have reined in spending since housing prices began a protracted slide in 2007, leaving the country with one of the world's highest levels of household debt.

Deflation means they have more money to spend at the end of the month, but it could also lead to consumers putting off buying big ticket items if they expect prices to fall further.

However, Handelsbanken economist Jes Asmussen said the deflation was unlikely to last.

"Looking at the trends in the price of services, wages, house prices and consumer expectations for inflation in Denmark, there is nothing to suggest that the Danish economy is about to be caught in a vicious deflationary spiral," he said according to business daily Boersen.