Flash comment: Lithuania - September 10, 2018
Inflation continues to ease despite rapid wage growth
Annual inflation eased to 2.1% in August and was the lowest since January 2017. Annual core inflation (without food and energy) stood at a modest 1.5%. The growth of consumer goods prices slowed down to 1.6% in August, while the pace services price growth at 3.3% was merely half of what it was a year ago. Average annual inflation stood at 3.3% in August.



Energy prices increased the most over a year – by 8.1%. Fuel contributed 0.9pp to total CPI, while solid fuels added another 0.4pp. Restaurants and hotels were third most important contributor at 0.23pp. Inflation was somewhat artificially dampened over these past months by VAT exemption changes last summer. Heating contributed -0.29, because exemption was put back into place last autumn. Without this purely technical contribution inflation would have been 2.4%.





Decline in average annual inflation will continue

Inflation is likely to hover around similar level for the remainder of the year. We expect average annual inflation to ease to 2.7% this year and 2.5% in 2019. Goods inflation is likely to remain at similar levels in the future, while services inflation should slightly accelerate due to rapidly increasing labour costs.

 

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

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