Producer price rises on export goods lower than overall in July

Producer prices in July rose 0.5%. In part it was determined by a rise in the costs of global energy resources observed in the first half of the year six months and belatedly reflected in the prices of thermal energy in July, mostly raising the overall producer price level of domestically produced goods (it rose by 0.7%).

Before the onset of the season of active consumption of thermal energy, the rise in energy prices may not be fully reflected in the appreciation of the production of other branches. The changes in producer prices there are to a large extent related to the changes in resource prices. For example, the global metal price indexes continued to drop in July and, according to the information published by the Central Statistical Bureau, the production of metals and their products was the greatest contributor to the drop in the producer price index. The main contributor to the rise in producer prices, on the other hand, was energy production as well as manufacturing of wood pulp and its products. A globally significant rise in wood pulp resource prices was not observed, but this branch is less dependent upon imported raw materials. The competitiveness of export products has been less affected by costs, since thermal energy and gas supply are branches directed primarily at the domestic market. The rise of producer prices for goods provided for the export market was at a mere 0.2%.

The prices of the principal resources and raw materials have resumed rising in the global market – primarily as a result of rises in energy and food raw materials prices. Since the harvests are lower than expected, the world prices of grain are already growing rapidly. Although the grain harvest in Latvia is good this year, that has no significant effect on price trends. The opportunity to export at a higher price allows the producers to raise the price on the part of production designated for domestic consumption. The positive news in this respect is increased income from exports.