On Inflation in November 2008
The annual inflation rate in November decreased by 2 percentage points compared to October (13.8%), to 11.8%. In the course of one month, the drop in consumer prices was significant, amounting to 0.4%, where prices of goods decreased by 0.6% and prices of services increased by only 0.2%.
The combination of a downturn of the economy and the low demand have caused a rapid decline in inflation, with the pressure of intlation expectations abating and changes in global oil and food prices being favourable. It is expected that the annual inflation rate in December could hover around 11.0% and the average annual inflation rate for 2008 might not quite reach the 15.5% previously forecast by the Bank of Latvia. The rapidly abating demand side pressure on inflation allows for expectations of one-digit inflation to be reached as early as the beginning of the new year.
Basic inflation in November diminished to the one-digit number of 9.8% primarily as a result of the diminished pressure of price rises for processed foods and other tradable goods.
The main contributors to the overall drop in consumer prices in November was the downward trend of global oil prices and plummeting demand.
As oil prices went down, fuel prices dropped 12.8% resulting in a negative, -6.3% annual rate of increase. The continued decrease in demand resulted in lower prices for footwear and apparel: year-on-year, these prices decreased 2.1%. Prices were also lower for foodstuffs, particularly vegetables (-4.5%), fruit (-1.1%), cheese (-3.3%), yet overall food prices in November grew by an average 0.2%. The unregulated rents, home repair services, car prices, and hotel services also became cheaper.
Heating tariffs in November registered an average increase of 6%. As for food items, the most significant price rise was recorded for fish and fish products (3.9%). Passenger land transport, recreation, sports and tourism related services also became more expensive.