Inflation rebounds in March

Chart 1 Annual inflation by consumption group (in percentage points)

Prices of services increased by 0.7% month-on-month in March, with the annual rate already reaching 3.7%. This confirms the previous forecasts. Should the factors exerting an upward pressure on prices (the growing costs of labour and energy) remain unchanged, similar rates could persist also in the future.

An increase was seen in the global food prices for the third consecutive month in March and it has been more substantial than in the same period of the previous year already. The prices of grain and milk were the ones experiencing the most notable rises. Grain prices may have risen in anticipation of a poorer harvest due to the unfavourable weather conditions in Europe, as this year the spring temperatures are lower and humidity higher than usual. As to the dairy products, higher prices could be explained by the rising demand. Food prices in Latvia, however, experienced a month-on-month drop of 0.1% in March; nevertheless, in the coming months the global prices are expected to pass through to the food prices in Latvia as well.

With the onset of spring, there has been a seasonal increase in prices of clothing and footwear as well as in those of tourism services. Looking at the price developments in those particular groups of goods and services over the last couple of years, it is obvious that it has been different across the groups. For example, clothing and particularly footwear as a rule tend to get cheaper and cheaper during the season, whereas outside the season increasingly more attractive offers are available to customers. This could be explained by the growing competition among trading companies as well as the changing spending habits of the consumers, with their preferences persistently shifting towards on-line shopping. The tendency characteristic of the prices of tourism services is the opposite: a rise during the season and a drop back to a certain threshold during off-season. This could be explained by the growing costs faced by the industry.

Chart 2: Consumer price index (2015 = 100)

Brent crude oil prices averaged 64.1 USD per barrel at stock exchanges in March, representing a minor increase over February. Nevertheless, in comparison with the previously-seen monthly price fluctuations the level of prices can be viewed as stable. This is also confirmed by the fuel prices in Latvia that even reported a small month-on-month decline of 0.1%.

Overall, inflation growth accelerated in March, largely on account of seasonal increases in prices on non-food products and services.