Producer prices grow and competitiveness increases simultaneously
For the fourth consecutive month, producer prices continued rising in March, primarily as a result of a substantial rise in producer prices of the exported products. The prices grew 0.8% over the previous month and were only 2.5% lower than a year ago.
The price rise was primarily effected by the developments in foreign markets, as the producer prices of exported production rose rapidly, their annual increase reaching 5.0%. As growth resumes in many parts of the world, the foreign demand stabilizes, moreover the global resource prices are also growing. The prices of ferrous metals rose notably thus affecting the Latvian producer prices of metals as well. The rise in metal prices constituted more than half (0.5 percentage points) of the total producer price rise against the previous month. The global rise in the prices of energy resources, which was reflected in a rapid rise in fuel prices in Latvia, has likewise increased the costs the producers face, thus putting an upward pressure on prices in many branches. A much smaller price rise was observed in the prices of goods manufactured for the domestic market: they were 7.1% lower than a year ago.
Even though the producer price index has been growing since December, it has been climbing slower than in the main trade partners and the competitiveness of Latvian entrepreneurs thus continues to improve. According to the latest available information, the real effective exchange rate of the lats, calculated on the basis of the producer price index, continues to decrease, which supports increased competitiveness. In January of this year, the real effective lats exchange rate was 8.3% lower than a year ago when it reached its highest point.