Producer prices do not create an upward pressure on consumer prices
In January 2013 producer prices in Latvia went up 0.3%, and this rise was the result of the 0.8% rise in the producer prices of manufacturing production for export. A downward influence on producer prices was the drop in producer prices of energy produced for the domestic market and export along with the drop in the price of natural gas. The annual rise in producer prices in industry at large dropped to 2.1% (see Fig.), because in January a year ago the observed month-on-month rise in producer prices was substantially faster (+1.8%).
Changes in producer price index (%)
The rise in the prices of exported production was primarily impacted by price changes in fluctuating groups of goods, e.g., printing and publishing and recording reproduction, where fluctuations are among the greatest because of the varied assortment, market and even seasonal factors. Other significant price rises are related to branches where the assortment and volume of goods produced for exports can fluctuate greatly from month to month (production of computers, electronic and optical equipment, clothing). The contribution of these branches to the rates of month-on-month and year-on-year rises was significant, but it does not point to any trend changes.
Meanwhile the producer price dynamics for the production sold domestically presents no risk for rises in inflation. The month-on-month rise in producer prices for total production sold domestically was 0.1% (as opposed to the 0.6% rise on production for the export market), including a 0.2% drop in energy production determined by a drop in the trade price of natural gas already reflected in the drop of January consumer prices. Within the year, a favourable influence of several domestic factors is expected on energy prices: in the coming months they could benefit from a positive influence of the trade price of natural gas and in the second quarter from the launch of new cogeneration stations or the positive effect of other possibilities of reduced costs on the prices of thermal energy, for instance, in Rēzekne and Riga.