Flash comment: Lithuania

Economic commentary by Economic Research Department February 14, 2013

CPI increased by 0.2% in January, more to come
Annual growth of producer prices, %
20% 15% 10% 5% 0% -5% -10% 2010 -1.5% 2011 2012 2013 PPI ex. oil products, mom (rs) PPI, yoy PPI ex. oil products, yoy 0.0% 1.5% 3.0%

Despite more expensive electricity and higher excise duties, consumer prices increased less than expected in January, only by 0.2%. Annual inflation declined to 2.6%, and average annual inflation was 3.0%, the lowest since the spring of 2011. More expensive electricity contributed 0.32 percentage points to the inflation in January, but this was almost fully offset by the sales of clothes. Higher excise duty on diesel also had a very limited effect on inflation (+0.05 pp), as stronger euro kept a lid on the price of imported oil.

Outlook
Producer prices increased by 0.8% in January, the fastest pace since July of 2011. Producers probably increased their prices due to more expensive electricity and higher minimum monthly wage, as well as increasing wage growth expectations of all employees. Higher producer prices soon will be reflected in higher CPI, which is expected to increase by more than 0.5% per month in the coming months. Average annual inflation will probably drop temporary below 3.0%, but will remain below Maastricht criterion which seems to be trending towards 2.5%. Lithuania’s ability to meet this criterion and adopt the euro in 2015 will be largely dependent on the trends in global commodity markets.

Source: Statistics Lithuania

Annual, monthly and average annual change in prices, %
6% 4% 2% 0% -2% 2010 2011 Monthly growth (rs) Average annual (ls) 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% -0.25% -0.50% 2012 2013 Annual growth (ls )
Source: Statistics Lithuania

Nerijus Mačiulis Chief Economist + 370 5 258 2237 nerijus.maciulis@swedbank.lt

Swedbank Economic Research Department SE-105 34 Stockholm, Sweden ek.sekr@swedbank.com www.swedbank.com Legally responsible publisher Magnus Alvesson, +46-8-5859 3341

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