Flash comment: Lithuania - October 8, 2018
A slight pick up in price growth
Annual inflation has rebounded to 2.4% from 2.1% in August. Compared with August prices grew by 1.3%. Several main factors determined price growth recently. First of all, prices of energy products are increasing globally. Automobile fuel and solid fuels contributed a total of 1.26 p.p. to overall CPI. Restaurants and hotels contributed another 0.22 p.p. Vegetables added further 0.24 p.p. to price growth. Increase in excise duties pushed tobacco prices 7.3% up and it contributed 0.18p.p. to overall inflation. However, cheaper fruits and heating have supressed CPI by 0.3p.p.



Overall, growth of prices of goods stood at 1.8%, while that of services picked up to 4% - mainly a reflection of rapidly increasing wages. Average annual inflation continued its steady decline and stood at 3.1%.



Decline in average annual inflation will continue
Price growth is set to fluctuate around similar level in the near future. We expect average annual inflation to ease to 2.7% this year and 2.5% in 2019. Goods inflation is likely to remain subdued in the future, while services inflation should slightly accelerate due to continued increase in labour costs. Upside risk to inflation is rapidly rising oil price, if supply from Iran and Venezuela continues falling or there would be additional disruptions to oil supply. If wage growth does not ease, as we currently expect, this too could lead to higher inflation.

 

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

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