According to the Central Statistical Bureau, in August this year, compared to July, the consumer price level increased by 0.4%. It increased by 0.3% for goods and by 0.5% for services.
August is characterized by a decrease in prices due to seasonal factors. However, prices rose in August this year, driven by rising energy prices and a slower decline in food prices than this month. Previously, the rise in prices in August was observed in the early 1990s, in 1997, 2007 and 2019.
The biggest upward effect in August was the rise in prices for electricity and heat. The price of electricity increased by 4.6%, while the price of heat increased by 3.2%, which was determined by the sharp rise in the price of natural gas due to the rise in world oil prices. It is expected that in September the prices of heat energy will continue to rise, as the increase of the heat energy tariff has been announced by JSC “Rīgas siltums” from September 1. The rise in prices for electricity and heat together increased the overall consumer price level by 0.3 percentage points.
The increase in prices for services by 0.5% had a large upward effect in August, increasing the overall consumer price level by 0.1 percentage points. The largest impact was observed in the prices of rents for housing, recreational and cultural services, catering and accommodation services, and maintenance and repair of personal transport equipment.
With the emergence of new autumn season goods in trade, prices for clothing increased by 1.7% in August, which increased the overall consumer price level by 0.1 percentage point.
In August, fuel prices increased slightly by 0.6%, which did not significantly affect the overall consumer price level. The rise in fuel prices continues to be driven by the sharp rise in world oil prices observed in recent months. However, in August, world oil prices fell by an average of 5.1% over the month. The fall in oil prices was driven by concerns about declining demand as the Covid-19 delta variant became more widespread worldwide.
The biggest depressing effect in August was the fall in food prices, but it was the slowest fall this month in recent years. During the month, food prices decreased by 0.3%, which reduced the overall consumer price level by 0.1 percentage points. The biggest downward effect due to seasonal factors was the fall in prices for fresh vegetables and potatoes, while the biggest upward effect was the rise in prices for fresh fruit. It should be noted that world food prices rose sharply in August after falling in the previous two months. In August, compared to July, they increased by 3.1%. Prices rose in all major food groups except dairy products. Sugar prices rose the most, continued to be affected by lower export opportunities from Brazil due to frost and drought. However, higher sugar prices were hampered by falling oil prices, a real weakening of Brazil against the USD and good yield prospects in the EU and India. Dairy prices, on the other hand, fell for the third month in a row. In August, this was due to falling prices for milk powder due to weak global import demand and growing exports from Oceania.
The fall in prices for household appliances-related goods by 1.3% also had a significant impact, reducing the overall consumer price level by 0.1 percentage point. In other groups of goods and services, price fluctuations last month did not significantly affect the overall price level.
In August 2021, compared to August of the previous year, consumer prices increased by 3.7%. The average annual inflation was 0.9%.
This year, the average annual inflation could be around 2.5%, which will be higher than in 2020. As the pandemic recedes and the economy recovers, consumer prices will stabilize. At the same time, it will still be determined by world price fluctuations.
Ministry of Economics
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