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Flash comment: Latvia (CPI)  - May 10, 2012
 

Flash comment: Latvia (CPI) - May 10, 2012

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Flash comment: Latvia (CPI) - May 10, 2012: Annual price growth continues to slow down

Flash comment: Latvia (CPI) - May 10, 2012: Annual price growth continues to slow down

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    Flash comment: Latvia (CPI)  - May 10, 2012 Flash comment: Latvia (CPI) - May 10, 2012 Document Transcript

    • Flash comment: Latvia Economic commentary by Economic Research Department May 10, 2012 Annual price growth continues to slow down Consumer price growth, % In April 2012, Latvian consumer prices increased by 0.6% 15 3 compared to previous month. This marginally exceeded our expectations (0.5%), mostly due to a surprisingly large increase in 10 2 clothing and footwear prices (7.1%). It is certainly mostly explained by seasonal factors; however, this is the biggest monthly increase 5 1 in April since 2001. At the same time, prices of clothing and 0 0 footwear are still by 0.7% lower than a year ago. In annual terms CPI growth continued to decelerate. Prices in April -5 -1 were by 2.8% higher than a year ago (3.3% in March). Food and -10 -2 housing services’ price growth continued to moderate (2.1% and 2009 2010 2011 2012 7.4% in April, respectively), while transport price growth CPI, mom (rs) Goods, yoy accelerated somewhat (to 4.7%). Prices of alcohol and tobacco Services, yoy Source: CSBL were by 5.2% higher than a year ago, those of hotels and Contribution to CPI annual growth, pp restaurant by 2.1%. Similarly to clothing and footwear, prices of 12 household equipment, health care, communications, recreation and 10 culture, and education were lower than a year ago. 8 6 Outlook 4 2 Following the unexpected sharp rise in global oil prices in the 0 beginning of this year, we have revised our inflation outlook -2 upwards for 2012. We expect consumer prices to rise by 2.8% on -4 average (2.4% before). Assuming that global oil prices do not rise -6 higher and retreat a bit during the year, price pressures will recede 2009 2010 2011 2012 in the second half of 2012. Food price growth is anticipated to be Food Transport Housing Other much slower this year, as global food prices to remain by and large Total, yoy growth Source: CSBL stable. The average inflation forecast for 2013 remains unchanged, Consumer inflation expectations and at 2.5%. Risks to the forecast come mainly from abroad, i.e., oil CPI growth, points prices. However, from 2013 onwards, there are also local risks, as 60 15 the strengthening labour market may make it easier for companies to raise prices for their products. 40 10 12 month average CPI annual inflation decelerated to 4.1% from 20 5 4.3% in March. It will continue to slow down in the coming months. 0 0 We consider fulfilling the Maastricht inflation criterion in early 2013 to be feasible, but more challenging than it appeared before. -20 -5 -40 -10 2009 2010 2011 2012 Lija Strašuna Consumer price expectations over next 12M Senior Economist Price expectations over next 3M in retail CPI annual growth, % + 371 6 744 5875 Source: DG ECFIN, CSBL lija.strasuna@swedbank.lvSwedbank Economic Research Department Flash comment is published as a service to our customers. We believe that we have used reliable sources and methods in the preparation of the analyses reported in this publication.SE-105 34 Stockholm, Sweden However, we cannot guarantee the accuracy or completeness of the report and cannot beek.sekr@swedbank.com held responsible for any error or omission in the underlying material or its use. Readers arewww.swedbank.com encouraged to base any (investment) decisions on other material as well. Neither Swedbank nor its employees may be held responsible for losses or damages, direct orLegally responsible publisher indirect, owing to any errors or omissions in Flash comment.Cecilia Hermansson, +46 8 5859 7720