Flash comment: Lithuania - February 14, 2019
Monthly inflation lower despite more expensive electricity

In January inflation eased to 1.7%, while monthly inflation stood at only 0.2% despite sharp increase in electricity prices. Interestingly, prices of public good and services increased by 5% while market prices increased only by 1.2% annually. Average annual inflation decelerated to 2.5%.

Monthly inflation was dampened by decrease in prices of clothing and footwear, a drop in prices in other types of energy products, moderate decrease in food prices.

Housing, utilities and other fuels contributed 1.1pp to annual inflation. Restaurants and hotels, health services added 0.32pp and 0.34pp respectively. Clothes, food and communications all contributed to inflation negatively a total 0.26pp.

Annual inflation is bottoming out, but will increase only slightly

Average annual inflation is expected to be 2.7% in 2019 and 2.5% next year. Inflation of prices of services will be considerably higher than that of goods due to rapid wage growth. Prices of public services are also likely to see faster growth, especially services, as they have a tighter link to wages. There is a risk of decline in the commodity prices if slowdown of China and global economy is sharper than expected, resolution to the Venezuela’s political crisis could have an impact to oil price in the medium term.

For more information about this report, please contact:

Vytenis Šimkus, +370 687 17870, vytenis.simkus@swedbank.lt.

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