Producer prices rise ever more slowly

Industrial producer prices dropped 0.1% in December, their annual rise dropping to 6.5%, the lowest figure since October 2010.

The difference, characteristic of almost the entire year between the annual growth rates of production for domestic and external market, held also in December. First, the branches that orient themselves toward the domestic market are different from the export-oriented ones, and, second, the assortment of products oriented to domestic and external market differs even within a single branch. The direction of price changes can thus vary within a branch depending on which market the production is meant for (in 2011, e.g., it was observed in the production of wearing apparel and readymade metal products).

Even though a month-on-month drop in prices was observed in the global food market, which had a beneficial effect on the food producer price dynamics in the domestic market (prices dropped 0.1% in the manufacturing of food products), it was not reflected in the consumer prices. In the December inflation data a month-on-month rise was observed in the prices of processed food and somewhat in catering. That supports the assumption that the rise in retail prices in these groups was short-lived and was due to the holiday season. With the global prices of oil products remaining high, the producer prices of domestically produced energy posted a slight rise also domestically (0.1% over November). Month-on-month a greater appreciation was observed in the producer prices of beverages, wearing apparel, metals and their products, paper and paper products and particularly – by 5.7% - electronic equipment.

The producer price dynamics in 2011 were significantly influenced by the changes in the prices of resources and raw materials in the global market. The average annual rise in producer prices of production sold domestically was 8.7%, which was reflected also in retail prices – particularly because of the appreciation of the production of food and energy branches. The producer price rise for exported production was lower (an annual average of 6.2%) in such branches as the production of readymade metal products, automobiles, trailers and semi-trailers as well as the repairs and installation of equipment and appliances where producer prices dropped compared to the 2010 average, having a beneficial influence on price competitiveness.

Month-on-month changes in producer prices in industrial branches, percentage points.

Month-on-month changes in producer prices in industrial branches, percentage points. 

Source: CSB

With the previous months' average price of oil products growing, so have the production costs of natural gas and thermal energy supplied to consumers, which will be reflected in consumer prices as early as January 2012. The warm winter, however, has allowed to save expenditure on actually consumed thermal energy, therefore, despite an appreciation of the production of thermal energy, the rise in the expenditure of households and industrial consumers is expected less than the rise in tariffs. No rise in salaries that would outpace a rise in productivity creating an additional pressure on producer price rises is expected in 2012. Thus it is expected that producer prices in 2012 will grow at a slower rate than in 2011.

APA: Paula, D. (2022, 28. may.). Producer prices rise ever more slowly. Taken from https://www.macroeconomics.lv/node/2259
MLA: Paula, Daina. "Producer prices rise ever more slowly" www.macroeconomics.lv. Tīmeklis. 28.05.2022. <https://www.macroeconomics.lv/node/2259>.

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