Consumer prices continue to fall
The average level of consumer prices in May continued to fall after an interval of four months. The persistently low domestic demand determined the downturn in prices and the average level of consumer prices in May was 0.1% lower month-on-month and 2.3% lower year-on-year. Prices both of food and various services continued to drop.
However, the price-increasing supply factors that had caused a short lived price rises in the previous months were also observed. Developments in the foreign markets and rising global energy prices in the last few months have acted to slow down the drop in consumer prices in Latvia; imports were made more expensive also by the weakening of the euro exchange rate. The rise in heat tariffs continued last month, slowing down the drop in the overall price level by 0.15 percentage points, whereas the rise in fuel prices has stopped.
Although several indicators point to a gradual recovery of the economy, the high unemployment level and caution the population exercises in its expenditure will persist in exerting a downward pressure on consumer prices in the coming months as well. A return to a moderate inflation, on the condition, that the influence of price increasing factors, e.g., energy resources, on the supply side does not increase substantially, can be expected in 2011.