Producer prices stabilizing
The industrial producer price rate remained unchanged in July, but influenced by the base, i.e. the low rate of the previous year, the annual rise continued reaching 6.2%. Under the influence of administered and producer prices, the consumer price deflation has been rapidly falling in recent months and the stabilizing of producer prices indicates that the pressure on consumer prices will abate.
Over one month, producer prices grew 0.4% for goods sold domestically: the rise was primarily determined by the rise in energy resource and food prices. The household natural gas tariffs rose and heating energy became more expensive outside Riga; moreover, as buying prices rose, so did the costs of food product manufacturing.
An opposite dynamic can be observed, for the second month running, in export production manufacturer prices: they dropped 0.7% over a month. That was primarily the result of dropping global metal prices as well as the rising euro exchange rate compared to the lowest point in June: the prices of goods Latvia exports to the countries outside the euro zone fell as a consequence.
As global natural resource prices continue to climb to a moderate extent, there is no reason to expect either a significant drop or a rise in the producer prices. Since no rise in administered prices is predicted in Latvia this year, domestic demand continues to be low, and labour costs continue to drop, the monthly producer prices may fall a little in the second half or the year.