Inflation in Latvia stood at 3.8% in November, with prices falling by 0.3% over the month. Although average price levels dipped slightly, there are still goods and services whose prices continue to rise.

In honour of Latvia's national holidays, a wide range of promotional prices was available on food in November, which is why food prices were on average 0.5% lower than a month earlier — though this followed a month in which prices had risen by a comparable amount. Whether the food price offers can keep pace in the Christmas mood, or whether December will bring a sharper rise in prices, we will find out very soon. Globally, however, the downward trend in food prices has been more sustained than the fluctuations here at home. With prices for oils, meat and dairy products falling, the food price index compiled by the Food and Agriculture Organization declined in November for the third month in a row.

The average price of electricity in Latvia rose in November, as wind farms made a smaller contribution to electricity generation while colder weather pushed up demand for energy. Following a modest rise in global oil prices, fuel prices in Latvia also went up. It should be borne in mind, though, that no sharp rise in global energy prices is expected over the longer term. In thermal energy, by contrast, the changes varied: some localities saw tariffs increase, while others saw them fall.

Sustained price growth is also being driven by strong wage growth, which both boosts demand and adds to costs on the supply side. Although the rise in average wages in Latvia has eased somewhat, it still stands at around 8%. It is worth recalling that average wage growth in Latvia has been strong and sustained for five years running (with wages rising by almost 10% a year on average). It is no surprise that this is also reflected in rising prices where labour is a significant cost factor. Service prices, for example, have risen by an average of 6% a year over the past five years, and a similar annual increase (5.6%) was maintained in November as well.

Although it is hard to notice in your wallet, inflation overall retreated slightly in November. Domestic factors suggest that price growth will remain strong over the coming months, while downward shifts in global prices give reason to think that significantly higher inflation figures are not to be expected in the months ahead.