A drop in food prices triggered by new harvest was smaller than expected, Vilija Tauraitė, chief analyst with SEB Bankas, Lithuania’s largest commercial bank, told BNS in comments on the developments in Lithuania’s consumer price index (CPI) in July.
“The seasonal factor was less favorable than we expected and did not drive inflation in the negative zone,” she said.
With domestic consumption rather stable, the prices were mostly affected by an increase in natural gas prices on 1 July, the analyst said projecting that Lithuania would continue to depend heavily on external factors, such as the prices of crude oil and gas, in the remaining months of this year. The prices of crude were quite stable for the meantime, Tauraitė said.
“Our inflation in fact depends on external factors for the meantime,” she said adding that the consumer prices should decline on a monthly basis in August.
“It is a traditional month of discount sales and we may also expect a drop in the prices of food products during the harvesting period. Of course, we will observe the prices of crude, which have been growing of lately...,” Tauraitė said.
Meanwhile, Mindaugas Jurgelis, analyst with Norway’s investment bank DNB Markets, believes that the period of declining inflation has come to an end.
“Lower inflation could hardly be expected in the country in the coming months. It will mostly be affected by changes in commodities’ prices. The prices of grain have been growing fast in recent months due to dry weather in Russia, Ukraine and Kazakhstan. The prices of crude oil are more likely to grow than to fall during the months to come since the difficulties in the world’s largest economies, such as the US, the euro zone and China, should trigger stronger response from the governments, which would drive the prices of commodities higher,” he said in comments.
Tauraitė also pointed out that the CPI in July did not contribute to Lithuania’s ambition to join the euro zone. She noted, however, that this issue did not seem that relevant any longer as Lithuania’s authorities, contrary than Latvia’s, did not show a clear aspiration to adopt the single European currency.
“We no longer see that objective established on a very official level now. For example, Latvians have declared that goal very clearly and they make very clear efforts. We do not see any intensive efforts [in Lithuania] now hence that euro goal will probably be pursued later,” Tauraitė said.
Lithuania’s consumer prices remained unchanged in July compared with June, Statistics Lithuania reports. The twelve-month inflation rate in July reached 2.8 percent and the average annual inflation rate was 3.5 percent, the office said.
Statistics Lithuania had forecast that the EU-harmonized monthly inflation rate in July would be minus 0.2 percent, the annual inflation rate would be 2.7 percent, and the average annual inflation rate would be 3.6 percent.
SEB Bankas also expected the consumer prices to fall by 0.2 percent in July from June.