How does the average Dutch person experience inflation?

Published on: 14 February 2024

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time Eduard Ponds and Evert Webers of APG Research on how the average Dutchman experiences the erratic course of the inflation rate in the Netherlands. “There is more reason in the individual than many people think.”


According to the harmonized consumer price index (HICP), which measures inflation in the euro area, our average price level in January was 3.1 percent higher than a year ago. In December, the year-on-year inflation rate was still 1 percent. The Netherlands is not unique with that rising inflation, but we are the euro country with the largest difference between December and January (+2.1 percent). 


The erratic inflation trend has a lot to do with the large influence of energy prices on the overall figure. In December 2023 consumers paid almost 25 percent less for natural gas and motor fuels than a year earlier, in January this “energy deflation” was only 2.2 percent. A major cause is the energy price cap that was introduced in January 2023, and then immediately led to lower prices. Before that, prices were higher, so the comparison with steadily falling energy prices resulted in sharply lower inflation - and even briefly in deflation in October, economists report in the Financieel Dagblad. In addition, price growth in other areas is declining slowly. Food, beverages and tobacco were 4.2 percent more expensive in January than a year ago (was 5.3 percent in December) and services 4.8 percent (was 4.1 percent). 


Higher than reality

But what do these fluctuations do to consumers? How do they experience inflation? “The average Dutch person overestimates the inflation rate,” Webers says. He grabs the latest measurements from the inflation survey, which APG Research has been conducting since November 2021. “At the time of the survey, the actual inflation rate according to Statistics Netherlands was 0.4 percent, but the average Dutchman thought it was 11 percent.”


In this, Webers sees a difference between working people and pensioners. “The latter group estimates things a bit more realistically; 7 percent instead of the actual 0.4 percent. So, they also overestimate it, but less extremely so.” 

Longer term

Ponds also notes the development over the longer term. “How do people look at price development in the past - twenty years back - in the present and in the future, twenty years ahead? Then you see that people do estimate that incredibly well; they keep it at an average price increase per year of just over 2 percent. Remarkable, because that inflation rate is also exactly what the European Central Bank (ECB) aims and proclaims in the medium term. So, you could say that that message from the ECB has really hit home. That is reassuring. Despite today’s overestimates, you can argue that there is more reason in the individual than many people currently think there is.” 


He cites an example from the study. “To gain insight into how ‘the average Dutch person’ estimates price increases, various products were presented with the question of what the price was twenty years ago, what the price is now and what the price will be in twenty years. The Dutch population estimates that a loaf of bread cost an average of 1.40 euros twenty years ago. That is a very accurate estimate, since a loaf of bread then cost an average of 1.39 euros.” When it comes to house prices, the Dutch citizen is also “up to date”. Ponds: “Residents of the Netherlands estimate that the average price of a house was 416,000 in 2022. That is close to reality, at an average of 425,000 euros. This is quite extraordinary, given that house prices rose very fast until 2022 and started to fall slightly at the end of 2022. At the time of our second poll, that price decline was not yet underway. Therefore, this estimated decline was ahead of the actual decline in home sales prices in the months that followed. So, you could say that Dutch people’s feelings and estimates are quite a good indicator of the actual development.”

esidents of the Netherlands estimate that the average price of a house was 416,000 in 2022. That is close to reality

Anger and stress

But that good picture over the years does not take away from the fact that Dutch people express themselves negatively about inflation, Webers argues. “When the ‘average Dutch person’ thinks about inflation, more than nine out of ten spontaneous thoughts or feelings are dismissive in nature. There is mostly anger and suspicion (seven in ten, ed.) and agitation, stress or gloom (four in ten, ed.).” The number of Dutch people who spontaneously become “furious” or “suspicious” at the thought of inflation did decline. In spring 2023 this was still 42 percent, in fall 2023 it was 31 percent, APG Research’s survey shows. 


There are concerns, especially about the loss of purchasing power. “People with a below-average income are more worried about their current and future purchasing power than those with an average or above-average income,” Webers tells us. This, he says, often involves the affordability of groceries or fixed expenses. To compensate for this and boost purchasing power, a majority (56 percent) of the more than 1,000 people surveyed by APG Research think taxes should be lowered. The price of groceries should also be lowered (50 percent), as well as energy prices (49 percent). Incidentally, 35 percent of those surveyed expect their income to offset (part of) the increase in inflation by 2024. Webers: “To gain insight into how ‘the average Dutch person’ assesses the increase in income, we asked whether they expect their income to rise in line with inflation. Over four in ten Dutch people expect their income to rise in the coming year, on average by 6 percent.”


APG Research also asked questions about pensions in the inflation survey. The answers show that Dutch people expect a pension of now 1,000 euros net per month to rise to 1,395 euros in 20 years. That is an increase of 39 percent. With that, the average Dutchman expects pensions to rise as fast as prices. Looking at the renewed system, two in ten Dutch people expect pensions to rise more often in line with prices. Likewise, two in ten expect pensions to rise as often as they do now. Three in ten think that pensions will rise in line with prices less often. Pensioners are more pessimistic about this (four in ten think pensions will rise less often) than non-retirees. 


Inflation survey

The latest measurement of APG's inflation survey was conducted in November 2023 among a representative sample of 1,051 residents of the Netherlands aged 18 or older. Previous measurements were conducted in November 2021, November 2022 and May 2023.