The Lithuanian consumer price index (CPI) grew 3.9% y/y in December, easing 0.5pp in comparison to the previous month, Statistics Lithuania said on January 9. Price growth averaged 3.7% in 2017, adding 2pp to the 2016 reading.
The price growth in December extends the inflationary trend in the Lithuanian CPI to two full years. The tightened labour market and the return of EU-funded investment are pushing significant demand-led price pressures in the Baltic state.
In annual terms, prices increased in all segments in December. The growth in the headline CPI was driven by a 3.8% y/y increase in the prices of food and non-alcoholic beverages, and an 11.6% annual expansion in the prices of alcohol and tobacco products. Prices also grew 4.5% y/y in the transport sector. Growth in prices in the utilities segment also contributed, with an expansion of 3.3% y/y in December.
Overall, prices of goods expanded 3.4% y/y in December, while services became 5.3% more expensive in annual terms. In monthly terms, CPI did not change in the twelfth month.
Throughout 2017, inflation drivers were food and non-alcoholic beverages, the prices of which grew 3.6% y/y, alcohol and tobacco, which saw prices grow 10.7% last year, and transport, with prices expanding 5.1%.
The Bank of Lithuania forecasts inflation will come in at 2.6% in 2018, as the impact of the main drivers will fade.
“The effect of growth of excise duties will level out. Global oil and food prices are also forecast to grow at a substantially slower pace this year. Wages’ growth will decelerate in 2018 as well,” the central bank wrote in a comment.