The growth of consumer prices in Latvia has practically stopped at the moment, and the annual inflation in April amounted to 1.1%, only slightly rising from the 0.9% recorded in the previous month, according to the data of the Central Statistics Office published on Friday. The low level of inflation is determined mainly by the drop in the prices of energy resources on the world market after the rapid rise in 2022, which lowered the prices of goods and services related to housing by a total of 6.1% compared to April last year. Following world trends, the prices of food and non-alcoholic beverages have also stabilized, having increased by only 0.6% during the year, and fuel price fluctuations no longer have a significant impact on inflation either, where motor fuel prices in April were 4.5% higher than a year ago .
If the prices of goods, with a total fall of 0.4%, had a lowering effect on the inflation rate, the increase in the prices of services is faster, by a total of 5.5% compared to April of last year, reflecting the previously rapidly growing costs and the still strong wage growth. In the service sector, prices have increased most significantly for housing management services (+7.5%), garbage collection (+16.2%), land and sea passenger transportation, health care and education services. It will continue to be the increase in service prices that will keep overall inflation close to 1%, while the increase in goods prices will be very limited.
In the following months too, a rapid increase in the prices of raw materials in the world markets is not expected, which could increase the prices of goods in Latvia more rapidly as well. Oil prices, after a recent rise due to the Middle East conflict, are once again showing downward dynamics. The US Energy Information Agency has just lowered its oil price forecast for 2024, a change based on slower growth in global oil consumption amid slowing economic growth and faster growth in oil production.
Similarly, global food prices are still on the downward trend. The food price index created by the Food and Agriculture Organization (FAO) has increased a lot in April compared to the previous months, however, this increase is still insignificant and overall raw food prices are 7.4% lower than in the corresponding month a year ago. The low increase in consumer prices in Latvia is also indicated by changes in producer prices, where the prices of industrial products sold on the local market in March were 11.1% lower than a year ago, including the entire manufacturing industry’s production by 4.9% and specifically the food industry’s production by 1. 4% lower, while producer prices in the electricity, gas supply and heat supply sector have fallen by 23% during the year.
At the same time, in the presence of very high geopolitical risks, the risks of a sharp increase in the prices of raw materials, both in global markets and in the region, which may lead to a repeated outbreak of inflation, are still not completely excluded. However, there is currently no evidence of the materialization of such risks, and in general, the April data once again confirm that the inflation level in Latvia remains low. At the moment, inflation in Latvia is one of the lowest in the European Union and the eurozone, and the year-over-year price increase in Latvia will be close to or slightly below the current forecasts of the Ministry of Finance, which predicted 1.6% inflation for Latvia this year at the beginning of February.
Ministry of Finance
