Latvian deflation picks up speed in March

Latvian deflation picks up speed in March
By bne IntelliNews April 8, 2016

Latvia's consumer price index (CPI) fell 0.6% y/y in March, data released by the Central Statistical Bureau (CSB) showed on April 8.

The reading shows deflation accelerating further after the February reading of -0.5%, and extends the trend for falling prices to three straight months. That's the first such run since a four month trend of inflation ended in June. In monthly terms, prices grew 0.7% in March, clearly faster the 0.1% expansion in February.

The fall in prices in March was driven by a drop of 5.8% in the transport sector. A contraction of 4% in the housing segment also had a major impact, the CSB noted.

Prices rose the most in the alcohol and tobacco segment, where the growth came in at 5%. A 3% expansion of prices in the health sector also helped limit the damage, while food prices inched up 0.2%.

The March result further clouds the outlook for inflation, which has showed an erratic trend through 2015. The European Commission forecasts Latvian CPI will expand at a rate of 1.4% in 2016 on the back of “expected dynamism of wage growth and the flattening of the energy indices," but the trend thus far this year makes that look ambitious.