Inflation at 4% in January and is set to ease this year
Inflation has crept up a little in January and stood at 4% annually. Prices rose by 0.3% since December. As previously prices of services grew at a faster pace than goods, 5.3% and 3.6% respectively. Notably the change in prices of services has been stable for the past three months, while goods prices have accelerated slightly.
Main contributors of inflation remain largely the same with few additions. Beer and wine were still the main culprits contributing 0.7pp to annual inflation and will continue to do so until March when a base effect will kick in. Fuel and energy contributed almost 0.6pp in January due to 22.3% increase in solid fuel price. Restaurants and hotels were almost 7% more expensive in January than same time last year and contributed 0.23pp.
Inflation will slowly ease this year
We expect the average annual inflation to ease to 3.3% this year. The base effect of tax changes will disappear in March, while contributions from global food & energy prices should also ease a bit towards the second half of the year. Stronger euro will make imports relatively cheaper this year. However, inflation, especially for services, will still be supported by strong wage growth. Global commodities prices have potential to increase due to strong global growth, also faster pace of EU fund allocation could also add some pressure.
For more information about this report, please contact Mr. Vytenis Šimkus, +370 5 258 5163, email@example.com
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