Deflation and inflation fight it out in March

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Latvian consumer prices in March were by 0.7% higher than in February and 0.6% lower than a year ago, fresh data from the Cenral statistics Bureau showed Friday.

Prices increased mostly due to a seasonal increase in the prices of clothing (by 9.8%) and footwear (by 10.5%), and due to more expensive vegetables (up by 4.9%). 

"Consumer prices rose rather swiftly in March last year as well, thus on an annual comparison there was still deflation – for the third consecutive month," said Swedbank in a commentary on the data.

"Although the lowest point in oil price seems to be behind [us], the historic drops and historically low levels of the oil price are still the main reason why the consumer prices are decreasing and will continue to do so for the next 2-3 months," Swedbank predicted. 

"Total consumer price growth this year is expected to be only slightly above zero. Imported deflation will continue to limit the price growth (fuel, heating and gas will be cheaper than a year ago), while domestic factors (wage growth, robust consumption, introduction of VAT for housing management services) will support it," the bank concluded.

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