Latvian deflation trundles on in May

Latvian deflation trundles on in May
By bne IntelliNews June 8, 2016

Latvia's consumer price index (CPI) fell 0.8% y/y in May, data released by the Central Statistical Bureau (CSB) showed on June 8.

The reading shows prices fell at the same rate as in April, and extends the deflation trend to five straight months. In monthly terms, however, prices grew 0.6%, faster than the 0.4% expansion in April.

The deflation in annual terms was driven by a drop of 5.6% in the transport sector. A contraction of 5.1% in the housing segment also had a major impact, the CSB noted. Transport and housing also did the most to push prices down the previous month also. Food prices fell 0.2%.

Prices rose the most in the alcohol and tobacco segment, where growth came in at 5.8%. A 2.7% expansion of prices in the communication sector also helped limit the damage.

The May reading appears to shift the odds in favour of deflation in 2016, following an erratic 2015. The European Commission forecast in the spring that Latvian CPI will expand at a rate of 0.2% through the full year, as low energy prices are likely to fully offset the effect of rising incomes.