Producer price rise moderates but is still fuelled by higher energy prices

In June producer prices continued on their upward trend, posting a 7.3% rise year-on-year. Their monthly increase of 0.5% mostly resulted from higher costs of energy production as the natural gas trading price moved up by 9.4%. On average, producer prices recorded a decrease in other sectors.

Reflecting further stabilisation and even moderation of global commodity prices, producer prices in manufacturing shrank by 0.1%, while those of export goods were 0.5% lower than in May. Prices of goods in manufacturing produced for the domestic market continued to grow; their rate of increase, however, saw a sharp slowdown. Prices of metal and wood products have decreased over the month; costs of the manufacture of computers, electronic equipment and furniture have also contracted. Prices of food manufactured for the domestic market continued to move up (+1.1%) as companies were obviously making up for the price declines of the previous years. Food exports saw a monthly price rise of a mere 0.1%.

In view of the expected price increase for natural gas, prices of goods produced for the domestic market will continue to grow at a more rapid pace than those of export goods. Although the price rise in energy-intensive sectors will persist on account of the growing (energy) costs, in manufacturing it will generally continue on the downward trend. It will basically be retailers who will decide on the extent to which the producer price stabilisation finds reflection also on the shop shelves. Since inflation expectations of general public are quite substantial, there is a risk that prices in the shops will be raised higher than necessary on account of a pick-up in costs. Inflation expectations and the low competitiveness in retail trade are factors allowing more easily to raise prices both for producers and retailers. 

APA: Kalnbērziņa, K. (2022, 26. may.). Producer price rise moderates but is still fuelled by higher energy prices. Taken from https://www.macroeconomics.lv/node/2314
MLA: Kalnbērziņa, Krista. "Producer price rise moderates but is still fuelled by higher energy prices" www.macroeconomics.lv. Tīmeklis. 26.05.2022. <https://www.macroeconomics.lv/node/2314>.

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