Flash comment: Latvia - September 10, 2012

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Flash comment: Latvia - September 10, 2012: Annual consumer price growth remains at 1.7% in August

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Flash comment: Latvia - September 10, 2012

  1. 1. Flash comment: Latvia Economic commentary by Economic Research Department September 10, 2012 Annual consumer price growth remains at 1.7% in August Consumer price growth, % In August 2012, Latvian consumer prices declined by 0.3% compared to 15 3 previous month. This is now fourth consecutive month with monthly deflation. In August monthly deflation was driven by seasonal declines in 10 2 prices of fruits and vegetables, as well as clothing and footwear. This time it was also “helped out” by fall in prices of alcohol and tobacco, and 5 1 household equipment. Meanwhile, fuel prices increased again after three 0 0 months of falling. VAT base rate cut in July might have continued to influence prices, at least suppressing price growth. -5 -1 CPI annual growth remained at 1.7% in August. Food prices were by -10 -2 2.1% higher than a year ago, transport – by 3.1%, housing – by 5.4%. 2009 2010 2011 2012 Prices of household equipment, clothing and footwear, communications, CPI, mom (rs) Goods, yoy and education were still lower than a year ago. Services, yoy Source: CSBL Contribution to CPI annual growth, pp 12 10 Outlook 8 Most likely August was the last month this year with monthly deflation. 6 Prices are expected to grow slowly in the remaining months, but annual 4 2 inflation will definitely stay below 3%. We forecast 2.5% average price 0 growth for 2012 overall. -2 Current inflation trends suggest that Latvia most likely will fulfil Maastricht -4 price stability criterion in March 2013. Therefore the main uncertainty -6 2009 2010 2011 2012 remains with respect to interest rates criterion. Food Transport Housing Other Total, yoy growth Source: CSBL Consumer inflation expectations and CPI growth, points Lija Strašuna 60 15 Senior Economist + 371 6 744 5875 40 10 lija.strasuna@swedbank.lv 20 5 0 0 -20 -5 -40 -10 2009 2010 2011 2012 Consumer price expectations over next 12M Price expectations over next 3M in retail CPI annual growth, % (rs) 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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