Lithuanian inflation accelerates again in June

Lithuanian inflation accelerates again in June
By bne IntelliNews July 11, 2016

The growth in Lithuania's consumer price index (CPI) picked up speed again in June to 0.7% y/y, data from Statistics Lithuania showed on July 11.

The reading shows inflation accelerating from 0.5% y/y in May, although CPI changed minimally in monthly terms, growing 0.1%. Positive inflation persists on the back of rising household income and stabilising oil prices. While Lithuania spent the whole of 2015 locked in deflation, so far this year, readings have remained positive.

Prices increased in most segments in June, with a 6.6% boost in the hotels and restaurants sector the largest gain, followed by a 6.1% increase in recreation and culture. Prices in the transport sector fell 7%, remaining the largest drag on headline inflation, but its influence is likely to diminish, Swedbank analysts suggest. 

“Even though oil prices most likely will not rise above the June level this year, the effect ... will continue to fade away ... because of the lower base effect,” they write.

On the other hand, accelerating wage growth and a 17% hike in the minimum wage will continue to drive service price growth. “Average annual inflation is expected to be slightly above 1.5% this year and continue increasing next year,” the analysts forecast. That conviction is yet to spread to institutions, however, with the European Commission pitching the likely gain in Lithuanian CPI at just 0.6%.