Lithuanian inflation extends new year rebound

Lithuanian inflation extends new year rebound
By bne IntelliNews April 8, 2016

Lithuania's consumer price index (CPI) extended its 2016 rebound in March, as it grew 1.2% y/y, data from Statistics Lithuania showed on April 8.

The reading shows prices accelerating further compared to the 0.9% growth in February. Following a full year of deflation in 2015, Lithuania kicked off the new year with a jump to 0.9% in January, and has not looked back since. In monthly terms, CPI grew 1% in March, reversing on a three-month deflation trend, the stats office data also showed.

Inflation in March was expected due to a hike in excise duties on tobacco and alcohol that took effect on March 1. However, the tightening labour market is expected to continue pushing CPI higher throughout 2016. Analysts at Swedbank predict average inflation across the year at 2% – not least on the back of a 17% hike in the minimum wage due later this year.

Prices increased in most segments in March, with a 7.1% boost in prices in recreation and culture the largest gainer, followed by a 5.4% increase in the hotels and restaurants segment. Prices in education and health care grew 4.1% and 3.9%, respectively.

However, transport, the main factor behind deflation across Europe thanks to the oil price collapse, remained in the doldrums. The segment saw prices drop 5.9%, faster than the 4.7% fall in February.

That offers support to the European Commission, which remains wary of forecasting a strong acceleration in inflation this year. The EU executive expects the oil price slump to continue, and forecasts Lithuanian CPI will fall 0.1%.