Flash comment: Latvia - January 11, 2017
Consumer prices increased by 0.1% in 2016 despite deflation in the first half of the year

Consumer prices increased by 0.6% in December 2016 compared to November in the same year. Thus annual inflation in December accelerated to 2.2%. On a monthly basis, food prices grew by 1.3% and contributed the most to the increase. Rise in heating, fuel and telecommunication services’ prices (2.5%, 2.3% and 3.2%, respectively) also supported price growth.

Consumer prices increased by 0.1% in 2016 despite deflation in the first half of the year. Consumer price growth was mostly supported by the following. First of all, alcohol and tobacco price growth (3.3% in 2016) due to higher excise taxes. Secondly, food prices growth (1.2%) due to higher sugar prices. Sugar prices increased by 11.9% in 2016 because of lower production in Brazil (the biggest sugar exporter country) and stronger real against the dollar. Communication service prices grew by 2.2% most probably as the deadline for the end of roaming charges approaches in mid-2017. On the other hand, due to cheaper oil housing services’ (incl., electricity, gas, heating) and fuel prices limited consumer price growth (-2.9% and -7.5%, respectively). 

Outlook

Our forecast for average annual inflation in 2017 is 2.5% due to growing commodity prices and expected wage growth.


For more information please contact Ms. Linda Vildava, +371 67444213, linda.vildava@swedbank.lv 

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