In June, producer price level increased on products realized on both the local and export markets. The largest upward impact on the level of producer prices was a rise in the prices of food products. The producer price level continues its downward trend and fell to 2.3% in June.
Ever since the steep fall of export products in February, Eurozone’s economic perspectives worsened. They negatively affect the health of global economy, strengthening China’s growth influence, says SEB Bank expert in macroeconomics Dainis Gaspuitis.
It echoed in prices for local market realization products, which rapidly tuned in with global tendencies. Increase will remain in the coming months on prices for gas and other energy resources; climate conditions also show a possibility for a price increase for different food product producers. Because of the drought, prices for corn and soy-beans already exceed 2007 and 2008 records, while wheat prices exceed 2010 levels, when Russia imposed export limits. Bad news is also coming in from the Ukrainian agriculture sector. If the situation does not change for the better, it will threaten with new political tensions in many regions of the world, the economist says.
Daina Paula, and economist of the Bank of Latvia, notes that the comparison with separate trade partner countries allows the thought that price changes in Latvia in June were not beneficial from a competitive standpoint. So, for example, in Estonia, which published data on the dynamics of producer prices, price level did not change at all in June, but in Lithuania – it decreased significantly, especially on export products. The economist believes that the influence of oil procession industry cannot be ignored, while the production of other export market intended products became cheaper in Lithuania. Paula notes that, so far, short term fluctuations are not showing any changes in competition tendencies.
Oil price increase continued in July, and no fast resolution can be seen neither in the EU sanctions against Iran, nor in the political unrest in Syria. Thus the oil market uncertainty remains high. Meanwhile, the first signals that agriculture is suffering from drought began popping up. No significant producer price level increase is expected to come to Latvia in the nearest future. Nevertheless, competitiveness of the local companies would not suffer too much, if global prices would equally affect production prices of even the largest trade partner countries.