Lithuania: Harmonized inflation drops to lowest level since September 2021 in July 2023
Harmonized inflation came in at 7.2% in July, down from June’s 8.2%. July’s result represented the lowest inflation rate since September 2021. The sharper drop was primarily driven by a sharp drop in price pressures for housing and utilities, and slower growth in prices for food and non-alcoholic beverages.
In addition, the trend pointed down, with annual average harmonized inflation coming in at 16.1% in July (June: 17.3%). Meanwhile, consumer price inflation fell to 7.4% in July, from June’s 9.0%.
Lastly, harmonized consumer prices dropped 0.21% in July over the previous month, a sharper drop than the 0.10% fall seen in June. July’s result marked the sharpest retreat in prices since July 2020.
Our panel sees inflation easing further in the remainder of 2023, mostly thanks to cooling price growth for energy and food, compounded with higher interest rates. That said, sustained growth in labor costs will likely keep services inflation elevated through year-end, thus preventing a larger moderation in overall price pressures this year. Stronger-than-expected economic activity and potential spikes in energy prices later this year pose upside risks to the outlook.