Prices in Lithuania fell for the fourth month in a row. However, people are unlikely to notice deflation yet, as the decrease in prices is insignificant, economists say.
The State Data Agency reported on Friday that in August, annual inflation in Lithuania was 6.2 percent, while monthly deflation of 0.2 percent was recorded. The deflation was recorded for the fourth consecutive month. The last time prices fell in Lithuania was in November 2021.
“Prices of transport goods and services rose by 2.3 percent in the month, but despite this, the overall inflation of goods dropped. This means that both Lithuanian manufacturers and foreign manufacturers selling goods in Lithuania are now more inclined to reduce the prices of their products,” Citadele Bank analyst Aleksandr Izgorodin told BNS.
Inflation in the services sector remains high due to wage increases, he added.
The population is also unlikely to notice the price decrease, said Indrė Genytė-Pikčienė, an economist at INVL Asset Management.
“It’s not yet possible for every consumer to see these changes because the price increases we saw last year pushed prices to very high levels, and although deflationary processes are already underway, they are still very small,” she told BNS.
According to the economist, seasonal sales sustained deflation in August.
“As we know, this was a period of shelf clearance, as well as the local harvest season. Prices were favourable for local vegetables and fruit production, so seasonal factors compensated for rising fuel prices,” Genytė-Pikčienė said.
Izgorodin, meanwhile, did not rule out the possibility of inflation replacing the monthly deflation in September, but prices of commodities other than energy and fuel should continue to decline.
“We should look at it a bit more broadly and look at commodity prices excluding energy. Here, I see that producers are increasingly motivated to reduce prices because consumption of goods in Lithuania and Europe is shrinking,” the analyst said.
According to Genytė-Pikčienė, current trends show that annual inflation in Lithuania is returning to normal.
“This is good and means that the inflation shock observed last year is receding and annual inflation is returning to normal,” she said.
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