Producer prices slightly down in November

In November 2013, producer prices in Latvia dropped slightly (-0.2%). Price changes have not been observed for production sold domestically, whereas for the exported production they dropped by 0.3%. In a breakdown by large industrial branches, the greatest reducing impact was felt in electrical power industry, gas supply, heat supply and air conditioning where producer prices for the exported production went down at a faster rate than for domestic production.

In the course of a month, producer prices dropped also in manufacturing. Their downward trend was primarily influenced by the drop in food prices. As noted previously, global food prices have an impact also on raw material purchase prices in Latvia and, as a result, on producer prices and consumer prices of food. The food price index of the UN Food and Agriculture Organization dropped minimally. (Yet it is still about 4.4% under the figure of last November.) Contrary to the rise observed since August, the world sugar price dropped rapidly in November. This drop was compensated by the increase observed in the prices of vegetable oils. World cereal prices continued on the downward trend, which began at the end of last year and, because of this year's record harvest, continued with only brief intervals. As a result, grain prices currently are about 24% below the level of last November. Dairy and meat product world prices were stable.  

A notably diminishing impact on producer prices was made also by the producer prices of wood products and chemical products. At the same time, month-on-month, producer prices experienced the strongest upwards pressure from the rise in the producer prices of electronic and optical equipment (+6.9%). This branch has lately been one of the most substantial promoters of growth in manufacturing.

Illustration. Month-on-month changes in producer prices and contributions by branch, percentage points

Source: CSD, Bank of Latvia calculations

A moderate rise in prices was observed year-on-year (+1.2%): 0.1% in the domestic market and 2.4% in exports. The prices of both domestically sold and exported production increased less than on average in the first 11 months of the year. One can thus conclude that overall, producer price dynamic is not exerting an upward pressure on consumer prices.