Inflation continues to recede and the factors affecting it have hardly changed since last month, however, the slight decrease in the price level of services was unexpected. Food and heat reduced inflation rates, while rising fuel prices due to tensions in global markets provided a significant upside, continuing their rise for the second month in a row. Accordingly, in August the overall price level fell by 0.6% compared to July and annual inflation reached 5.4% in August.
Food and non-alcoholic beverages experienced the biggest decline (-1.8%), mainly due to lower prices of fresh vegetables. Prices of goods and services related to housing also decreased (-1.2%). The most significant positive contribution was made by transport and related services (+2.2%).
After the sharp increase in tariffs in July, electricity prices have fallen by 3% compared to the previous month. Heat tariffs in the regions continued to decrease (-1.7% in August) and in September their drop is also expected in Riga. Accordingly, the hope for a more budget-friendly heating season for households is still justified.
Fuel prices in August increased by 6.6% compared to July. Russia and Saudi Arabia, the world’s biggest oil exporters, have just announced that they will continue to curb their oil output until the end of the year. Since the announcement of June, the price of oil on the market has increased by 23%. As a result, the price of brent oil has returned to the level of November last year, but the rapid rise in the price is currently limited by falling demand. The significant and sometimes unpredictable market movements raise the question of whether interest rates will be raised for the last time at the next week’s planned meeting of the European Central Bank, as we previously expected.
In August, the price level of services unexpectedly decreased by 0.1%. The last time we experienced a drop in service prices compared to the previous month was in February 2021. One of the reasons here is the reduction in prices of air transport services, which we usually experience in the autumn months of the year.
On the other hand, the average net salary this year In the 2nd quarter, it exceeded the annual rate of change of inflation by 0.1 percentage points, thus breaking the long-lasting decline in purchasing power for more than a year. In general, this is positive news for the population and in 2025 we predict that we will return to the purchasing power level of 2021. But on the other hand, there are concerns that the rise in wages will create an inflation-wage spiral.
In August, “Swedbank” reduced the inflation forecast – the annual average inflation is estimated at 9%, and inflation in December, compared to December 2022, is forecast at around 2%. However, the recent rise in oil prices poses upside risks to our forecast.
2023-09-10 12:35:47
#Swedbank #World #market #shocks #heat #inflation
