Flash Comment: Lithuania - November 8, 2011: Inflation in Lithuania moderates, in line with expectations

1. Flash comment
Economic commentary by Economic Research Department November 08, 2011
Inflation in Lithuania moderates, in line with expectations
Contribution to annual CPI growth, Consumer prices increased by 0.1% in October and were 4.2%
pp higher than a year ago.
14
A biggest impact to inflation was due to higher prices of clothes and
12
footwear, which were 2.4% dearer than a month ago. Had the
10
(usually volatile) prices of these two products remained the same,
8
October would have been a month of deflation.
6
4 A more expensive fuel and fruits also had a noticeable positive
2 impact on inflation. Transportation costs were 0.5% higher than a
0 month ago, whereas housing costs (water, electricity, gas etc.)
-2 increased by 0.2%.
2007 2008 2009 2010 2011
Food Transports In October, prices of food and non-alcoholic beverages, household
Housing Others
CPI growth
Source: Statistics Lithuania, Swedbank
equipment, health care services, recreation, accommodation and
restaurant services were lower than a month ago.
CPI and inflation expectations Producer prices (excluding oil products) in October increased by a
14 105
meagre 0.1% - the lowest pace this year. We expect this
12 90 moderation to continue and will have a downward pressure on
10 75 consumer prices.
8 60
6 45 Outlook
4 30
Uncertainty in Global and European economies remains and will
2 15
cause a downward pressure on consumer and producer prices.
0 0
Wage increase expectations will be subdued, whereas prices of
-2 -15
commodities are expected to decline somewhat from current levels.
2006 2007 2008 2009 2010 2011
CPI, % yoy (ls) Inflation expectation (rs) Consumer expectations of inflation (a component of consumer
Source: Statistics Lithuania confidence index) remain at elevated levels, but are likely to decline
somewhat in a near future.
We expect little increase in consumer prices in the remaining two
months of this year. We forecast average annual inflation to be 4%
at the end of this year, and decline to 2.5% at the end of 2012.
Nerijus Mačiulis
Chief Economist
+ 370 688 76578
nerijus.maciulis@swedbank.lt
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