World trends reflected in the producer price dynamics

Producer prices continued to rise in February; gaining 0.7% month-on-month and 8.6% year-on-year. The rise continued to result from the rapidly rising global prices. Within one month, producer prices have risen 1.6% for export products, with food, wood pulp and metal producer prices climbing. The prices of goods sold in the domestic market remained unchanged month-on-month, the price rise in manufacturing, particularly in food production, was compensated by a drop in energy production prices. 

The events both in Japan and in Libya and Middle East have had the effect of augmenting uncertainty regarding future developments in global oil prices: at the moment they depend on how soon the situation in the oil producing countries, which has escalated into a military conflict, gets stabilized as well as on Japan's ability to resume production and hence demand, particularly for oil products. Global food prices are being driven up both by the growing demand, particularly on the part of China, India, and Brazil, and the rise in energy resource prices, which drive up production costs.

In the near future, global price hikes and accordingly their effect on raw material prices in Latvia are likely to continue. The producer prices of products sold domestically will continue to be limited by the low local demand and low labour costs; but even here a rise in prices determined by world tendencies will be unavoidable in the near future. Since the rise in raw materials prices affect enterprises all over the world, Latvian producers who export their production will benefit from the lower labour costs, which open opportunities for successful competition reacting to the rising global demand.