After two months of deflation, price growth resumed in Latvia in July, and consumer prices have risen by 0.5% month-on-month., according to the latest data of the Central Statistical Bureau.
The Ministry of Finance explained that the resumption of inflation was ensured by the atypical rise in prices compared to the previous month in July, which was determined by the dynamics of energy prices on the world market, rising food prices and rising prices for services after easing emergency restrictions.
Overall, the price dynamics in July confirm that demand in the economy is recovering quite rapidly and this was also reflected in the 0.2% month-on-month rise in prices.
Despite initial forecasts of a further fall in oil prices as a result of the Covid-19 crisis, in July Brent The price of crude oil increased by 6% month-on-month, which was also reflected in the rise in fuel prices in Latvia by 3.4% month-on-month. As a result, compared to July last year, the decrease in fuel prices was already significantly smaller than in the previous three months – 11.2%, while in previous months fuel prices had fallen by about 20%.
World food prices are also on the rise for the second month in a row, with unprocessed food prices up 1.2% in July from July and up from July last year, according to the Food and Agriculture Organization (FAO) food price index. about 1%.
The Ministry of Finance pointed out that the dynamics of food prices in Latvia was similar in July, when food and non-alcoholic beverage prices increased by 0.6% month-on-month, while traditionally food prices decreased this month, mainly due to seasonal fruit and vegetable prices. Accordingly, year-on-year growth in food prices, which had fallen from over 3% at the beginning of this year to just 1% in June, returned to 2.8% in July.
The month-on-month increase in total prices was also driven by higher prices for leisure and cultural goods and services, restaurant and hotel services, air passenger transport, health care goods and services, and housing rents, with the sectors most directly affected by the crisis increasingly resuming emergency response. mitigation.
On an annual basis, inflation dynamics in July, as in previous months, were mainly driven by rising prices for food, health care, restaurants and hotels, leisure and cultural goods and services, as well as falling prices for fuel and housing-related goods and services, including electricity, natural gas and also for heat. These factors will continue to determine the development of prices in the coming months as well, and in general the inflation rate this year will be significantly lower than last year, when the price increase was 2.8%, the Ministry of Finance forecast.