Flash comment: Lithuania - May 9, 2018
Annual inflation falls to 2.3% in April
In line with our expectations annual inflation continued to ease and stood at 2.3% in April. In annual terms, prices of consumer goods and services increased by 1.5% and 4.7%, respectively. Consumer prices were 0.6% higher compared to March - monthly price dynamics were still dominated by new clothing collections entering the shops coupled with an increase in the price of vegetables.

Main contributors to annual inflation remain largely unchanged - solid fuels (0.33pp), dairy products (0.26pp), hotels and restaurants (0.22pp) and tobacco products (0.22pp). An increase in the price of oil of nearly 30% has not been reflected in consumer prices thus far, price of fuel increased by only 1% annually. A drop in the price of pharmaceuticals contributed -0.1pp to CPI. Continuing decline in prices of medicaments could be related to changes in governmental policy regarding drug cost reimbursement. Prices of communication services declined 1.6%, likely due to highly competitive environment in the sector. Prices of alcoholic beverages were 1% lower than a year ago, could be that companies are not able to transfer full cost of excise duties (which were raised substantially last year) to final consumers due to competitive environment.


Decline in average annual inflation will continue

We expect average annual inflation to moderate to 3% this year, which currently stands at 3.8%. Effects of alcohol excise duties have disappeared, however impact of oil price increase will be more visible in the remainder of the year, especially in the summer months. Prices of services will continue to increase at a faster pace than goods as labour market conditions remains tight.

 


For more information about this report, please contact Mr. Vytenis Šimkus, +370 5 258 5163, vytenis.simkus@swedbank.lt

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