The Lithuanian consumer price index (CPI) surged to 4.8% y/y in September, adding 0.4pp compared with the annual reading the previous month, Statistics Lithuania said on October 9.
The September reading – the fastest annual price growth since mid-2011 – extends the surge in the Lithuanian CPI that is part of a regional phenomenon across Central Europe. Annual inflation growth of 4.8% is the highest rate currently found in the region and refuted predictions that the August surge marked peak inflation this year.
Lithuanian prices have now been inflationary in every month since January 2016, supported by rising household incomes and higher oil prices. 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. The headline CPI was driven by a 4.7% y/y increase in prices of food and non-alcoholic beverages, 4.5% annual price growth in the transport sector, and a 12.2% expansion in prices of alcohol and tobacco products that owed to increased excise duties.
Prices in the utilities segment also contributed, growing 4.4% y/y in September. In monthly terms, CPI expanded 1%. Overall, prices of goods expanded 4.4% y/y in the ninth month, while services became 6% more expensive in annual terms.
Inflation will come in at 3.5% in 2017, before easing to 3% and 2.5% in 2018 and 2019 respectively, Swedbank predicts.