Deflation in heating due to heating tariffs and food prices has returned to Latvia

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August is characterized by a decrease in prices due to seasonal factors. “Food had the biggest impact on the fall in consumer prices in August. Food prices fell by 1.2% over the month, leading to a fall of 0.3 percentage points in the overall price level. The biggest impact was the fall in prices for fresh vegetables, potatoes and meat,” he explains. Ministry of Economy Ieva Šnīdere, an analyst of the Analytical Service, noting that world food prices continue to rise for the third month in a row. BanksCitadel“Economist Mārtiņš Āboliņš adds that the return of deflation in Latvia is likely to be short – lived and is related to the reduction of heating tariffs in Riga, but a sharp rise in prices is not expected in the near future, and low inflation in Latvia will remain at least until the end of the year.

“Total inflation reflected the JSC introduced on August 1”The heat of Riga“heat tariff. This provided a price reduction of 4.5% in a month, but compared to August last year, heat prices were even 11% lower. Although the heating season has not begun and residents have not yet received their first bills, the tariff change already affects the overall price level.Lower utility bills are already happy for the whole of 2020, and in October we will see further price reductions, “points out”Swedbank“Economist Laimdota Komare.

“Annual inflation will not change much until one year after the start of the pandemic, or the underlying effect of this event is over. For this to happen, the outlook for commodity price stability in future transactions must be fulfilled. We will then gradually begin to feel the effects of warming measures on the labor market. However, a large inflation drama is not expected, as price growth in the euro area as a whole will be very slow, “banks forecast”Luminor“economist Pēteris Strautiņš.

“The pressure from wages has eased a bit, but it has not disappeared. Next year, as the labor market warms up, it will start to intensify again, which we will also notice in price changes,” he says.SEB bank “economist Dainis Gašpuitis.

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