Raised electrical power tariffs in Latvia push up producer prices

Whereas globally commodity prices are beginning to show signs of stabilizing, in Latvia producer prices still continued to rise in April. The prices rose 2.3% month-on-month and 8.6% year-on-year. The price rise was determined by the appreciation of goods produced for the domestic market, with prices rising in this group by 4.2% over a month. About 90% of this rise was accounted for by a rise in electrical power tariffs, which was accompanied by producer price rises in manufacturing. A significant pressure of raw materials prices is still being observed in manufacturing, and substantial price rises were observed in the industries where an important part of the costs is the price of raw materials, particularly food industry, metal and wood pulp production etc.

The stabilizing of food and energy as well as other commodity prices currently observed in global markets is expected to soon be reflected in the producer price dynamics in also Latvia, which, in time, will ease the pressure on consumer price rises. Yet the fact that the prices of natural gas, which is mostly used for energy production in Latvia, are tied to the average energy prices of the last nine months implies that in the prices of energy a rise is still to be expected and that it will thus keep pushing up production costs. The rise in sales prices of natural gas will be reflected in the May and June price indicators.