Flash comment: Latvia - August 10, 2015
Annual CPI inflation decelerates to 0% in July
  • Goods’ prices down by 1.0%, prices of services continued to increase moderately
  • Monthly deflation at sharp 1.0%
  • The average inflation in 2015 likely lower than the April forecast of 0.8%

The monthly deflation was at sharp 1.0%, which is the swiftest decline in the last 18 years. Sharper than on average seasonal decline in the prices of clothing and footwear (by 7.9% in monthly terms), seasonal decrease in food prices (0.9%) as well as decline in the price of natural gas (8.7%) and heat energy (3.6%) contributed the most to the drop.

Consumer prices were flat in annual terms. Prices of services continued to increase moderately (2.6%), supported by robust wage growth. Lower oil prices (by 38% annually in euro terms) contributed to the decline in the prices of fuel (11.2%), heat energy (10.7%) and natural gas (9.5%). Prices of food declined by 2%, with a noticeable drop in certain product groups, e.g., milk (12%) and vegetables (7%). Prices of goods overall were by 1.0% lower than a year ago.

Outlook: Price to remain consumer friendly this year

Price growth will continue to be consumer-friendly in the forthcoming months as well - growing very modestly, or even declining slightly in some of the months. A hike in excise tax for alcohol products as of 1st of August, and an increase in the price of education due to the increase in the tuition fee for some of the study programs in the University of Latvia might have a marginal impact on the price growth in next months. Additionally, at the end of the year, the growth is likely to accelerate due to the base effects in oil prices starting to disappear. Overall though, consumer price growth this year is expected to be very humble, it is likely that it will be slightly lower than the April forecast of 0.8%.

For more information please contact Mr. Andrejs Semjonovs, +371 67445844, andrejs.semjonovs@swedbank.lv

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