Flash comment: Latvia - April 11, 2012

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Flash comment: Latvia - April 11, 2012: Annual consumer price growth to moderate further

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Flash comment: Latvia - April 11, 2012

  1. 1. Flash comment: Latvia Economic commentary by Economic Research Department April 11, 2012 Annual consumer price growth to moderate further Consumer price growth, % In March 2012, Latvian consumer prices increased by 0.6% 15 3 compared to previous month. This marginally exceeded our expectations (0.5%). The main drivers of the monthly growth were 10 2 prices of food (fruits and vegetables due to seasonal factors, as well as eggs), transport (mainly fuel), and clothing and footwear 5 1 (seasonal factors as well). 0 0 In annual terms CPI growth continued to decelerate. Prices in March were by 3.3% higher than a year ago (3.4% in February, -5 -1 3.6% in January 2012). The most rapid price growth was observed -10 -2 in housing services (10.2%) and in transport (4.1%). Annual price 2009 2010 2011 2012 declines were in education (-2%), communications (-1.2%), CPI, mom (rs) Goods, yoy recreation and culture (-0.7%), and health care (-0.3%). Food price Services, yoy Source: CSBL growth accelerated somewhat, but still was below 3% in March. Contribution to CPI annual growth, pp 12 10 Outlook 8 6 Global oil price growth so far is anticipated to result in higher 4 natural gas tariffs for households this summer, although the 2 increase will be smaller than in January 2012. Heating tariffs are 0 also forecast to go up somewhat, but they will not influence -2 consumer pockets until autumn, when next heating season starts. -4 However, with oil prices stabilizing, pressures on Latvian fuel prices -6 and housing tariffs will fade away as well. 2009 2010 2011 2012 Food Transport Housing Other A fall in annual price growth is expected to become more Total, yoy growth Source: CSBL pronounced in April, when effect from last year’s electricity tariff rise Consumer inflation expectations and disappears. In the second half of the year a small pick-up in CPI growth, points inflation rate is likely, though. Since oil price growth in the 60 15 beginning was stronger than expected, we most likely will revise upwards our average inflation forecast for this year (from 2.4% 40 10 forecast in January outlook). 20 5 0 0 Lija Strašuna -20 -5 Senior Economist + 371 6 744 5875 -40 -10 lija.strasuna@swedbank.lv 2009 2010 2011 2012 Consumer price expectations over next 12M Price expectations over next 12M in retail CPI annual growth, % Source: DG ECFIN, CSBLSwedbank 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

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