OREANDA-NEWS. December 11, 2008. In November Latvia experienced deflation, which is unusual for this time of the year: in comparison with October prices have declined by 0.4% on average, reported the press-centre of Latvijas Krajbanka.

In its turn, in comparison with the last year’s November, prices have grown by 11.8%, meaning that since May, when inflation reached the highest point over the last ten years, it has already diminished by 5.7 percentage points. Besides, we have to mention that the possible more rapid inflation decline was restricted by the rise of prices to energy tariffs, which is typical for autumn.

The start of seasonal discounts and the demand decline furthered price decline to clothing and footwear. It is important to note that the oil prices on the world’s markets are continuing to decline: oil WTI quotations are already under 45 USA dollars per barrel, and the existing tendencies allow expecting the further decline of oil price. If the scenario will be implemented, the prices to fuel in Latvia could reach the level of 50 santims per one litre, which will diminish the inflation pressure even more. Lately the prices to fuel have diminished by 12.8% on average, which is the main factor furthering deflation in November.

There is no doubt that the economical decrease and rapid decline of consumption will continue to further price decline for separate groups of goods and services, and more slower price rise to others. In the market conditions, when consumers are reviewing their expenses dramatically, several entrepreneurs will be forced to reduce the prices both when the added premium allows doing so, and if it means operation at a deficit.

Often we hear that people do not feel the decline of annual inflation in the country. Firstly, when comparing with the previous year’s prices, the increase is still quite impressive. Secondly, it is important that prices to the goods and services with the biggest proportion in the consumption basket – for instance, dwelling related expenses, separate food products, etc. – are still continuing to grow.

It is obvious that the next year inflation will reach on-digit number. Even more – we could experience deflation (the price decline over one month) not only during the summer months. The November statistics indicates that today’s economical processes cannot be compared with those ones experienced during the last 10-15 years.