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Wednesday 20.09.2017 | Name days: Marianna, Ginters, Guntra

Economists: annual inflation nears 5% in May

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 Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUCompared to May 2010, consumer prices in Latvia climbed 4.8% up to 4.9% in May 2011. On a monthly basis, the price climb was relatively small – 0.3% up to 0.4%,  economists say.

Swedbank senior economist Lija Strašuna explains that in May the food price surge somewhat slowed down and fuel prices dropped slightly. However, clothing and footwear will gain amid seasonal fluctuations, although at a slower pace than last month.

Also, SEB bank macroeconomic expert Dainis Gašpuitis believes May was not an exception and prices continued to climb due to several factors, including food price gains.

While Citadele Asset Management explains that the main inflation driver was vegetable and fruit price seasonal growth, as well as 4% heating tariffs increase in Riga due to gaining natural gas – 6.6%.

Yet heating price surge will not affect household income, because the heating season has already rounded up. However, the gas price increase has a very fundamental basis, considering the rapid price gains on oil products since late 2010, also affecting price of gas supplies to Latvia.

Most likely, gas sales tariffs for large consumers will keep rising in the coming months, in parallel boosting also heating tariffs and the overall price level. There is a real risk people will feel these formal price gains in the next heating season, indicate Citadele Asset Management analysts.

Swedbank estimates that in annual terms inflation is likely to remain close to 5% in the following months as well, while Citadele Asset Management experts expect the annual inflation to reach its highest point (slightly above 5%) in the next months, while stabilizing at 4.5% in the second half of the year.

Despite the projected inflation stabilization in the second half of 2011, Citadele Asset Management forecasts Latvia will be unable to meet the Maastricht inflation criterion already at the end of the summer. Most likely, the return to criterion implementation will be slow and hard.

The Maastricht criteria require the country’s inflation rate does not exceed the average inflation rate in three European countries with the lowest inflation in the previous year by 1.5 percentage points. According to the information available on the Bank of Latvia’s website, over the last 12 months the average Maastricht annual inflation criterion is 2.4%, while in Latvia the figure comprised 1.3% in April 2011.

As reported, in April 2011 the average consumer price level was 4.5% higher, compared to April 2010, according to the Central Statistical Bureau data.

Prices for goods increased 6.1% and for services – 0.2%. Over the last 12 months the average consumer price level has spiked 1,5%, compared to the previous 12 months.

Consumer prices in April rose 1.1%, compared to March. Prices for goods climbed 1.6%, but the average price level of services remained flat. In April 2010, compared to March 2010, the average consumer price level edged up 0.9%.

Increase in the prices of housing-related goods and services, clothing, shoes, food and fuel had the greatest impact on consumer price changes in April 2011.

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