Flash comment: Latvia - May 10, 2018
Annual inflation at 2% in April

Annual inflation decreased to 2.0% in April with both prices of goods and services decelerating slightly on annual basis. Goods prices grew by 1.5% whereas service prices – by 3.3%. 

Global food prices have recently exhibited an upward trend owing to an increase in global cereal and milk prices. However, food prices in Latvia declined on monthly basis. Similarly, Brent oil price has just reached the highest level since the end of 2014, namely, 78 USD per barrel due to USA withdrawal from Iran nuclear deal. Meanwhile, fuel prices declined in April compared to March. In addition, euro dollar exchange rate ha slightly slipped since mid-April on the back of weaker Eurozone data. These factors usually feed into prices with a delay so going forward they can have a slight goods' price elevating effect. 

Outlook 

Four months of rather low inflation erase expectations that average annual inflation could notably exceed last year’s rate. Surveys show that consumer expectations about price increases within a year have been easing already since fall last year. Possibly, that could hinder some businesses to raise prices. Yet, with average gross wage growth close to 9% prices, especially service, should accelerate. Without raising prices it will become harder for businesses to maintain a healthy financial situation. Taking into account the speed of economic growth, annual inflation rates this year have been favourable to consumer pockets.


For more information please contact Ms. Linda Vildava, +371 67444213, linda.vildava@swedbank.lv 

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