Consumer price level stable in February, will continue to drop
In February the consumer price level remained unchanged against January. As a result of low demand and competition, prices continued to drop for clothing and footwear as well as a number of services not regulated administratively. This drop in prices however was compensated by the increased excise tax on alcoholic beverages; albeit at a slower rate than in January, fuel prices continued to rise and, because of seasonal factors, so did vegetable prices.
As the price level dropped and the last year's significant influence of indirect tax increases on the annual price level comparison ended, the annual deflation continued to grow rapidly. The price level was already 4.2% lower in February year-on-year. Moreover, the twelve-month average inflation in Latvia reached 1.3%, which indicates that Latvia has rapidly approximated the inflation reference value of the Maastricht criterion, which is calculated adding 1.5 percentage points to the average value of the three lowest inflation indicators of the European Union. A more precise information will be available when the February harmonized consumer price index dynamics in Latvia and the other EU member states is published.
It is expected that soon the rapid drop in inflation over the previous year and the deflation observed in recent months as a result of the so-called "base effect" will stabilize, but it does not mean that the downward adjustment of prices has concluded - in the near future, the weak domestic demand will continue to determine the lowering of the price level and, if economic activity continues to be weak, prices will continue to drop overall throughout the year.