Analysts: energy prices are not yet driving up food prices; inflation will rise later as a result

With statisticians recording preliminary annual inflation of 6.1 per cent and monthly inflation of 0.1 per cent in October, analysts say that high energy prices are not yet affecting food prices. They forecast a sharper rise in inflation in the coming months, partly due to rising heating costs.

Tadas Povilauskas, an economist at SEB Bank, says that the minimal monthly price rise came as a positive surprise. “Bearing in mind that we are living through a period of rising energy prices and are wondering when this will be passed on to final consumer prices next year, it is quite good news in this context that monthly inflation is the same as in October in previous years“ – T. Povilauskas told BNS on Wednesday.

According to T. Povilauskas, the smaller-than-expected rise in prices was due to food prices remaining stable so far, as well as heating costs falling slightly compared with September.

“There was no food inflation in October; developments remain favourable for consumers. So far, food prices have held up against inflation,” said T. Povilauskas. “In October, heating costs fell compared with September, which has historically been rare. This is linked to the fact that there was a rather unusual drop in heating prices in Vilnius in October, which also helped to reduce inflation.“

For his part, Aleksandras Izgorodinas, an economist at Citadele Bank, says that annual inflation was most affected by rising prices for fuel, gas and services in restaurants and cafés.

“The war in Iran, the complex situation in the European gas market, plus our domestic factors – wage growth and, to some extent, pension reform – are currently the main drivers pushing inflation upwards,” – A. Izgorodinas told BNS.

According to him, Lithuania stands out from other eurozone countries – in most of them, inflation is driven solely by energy prices, whereas in Lithuania it is additionally influenced by economic and consumption growth.

Meanwhile, T. Povilauskas emphasised that monthly inflation was not driven by fuel prices, which stabilised following a rise in September.

Higher inflation and rising food prices forecast

SEB economist T. Povilauskas says that inflation will rise more rapidly again in November. “We will probably see it again in November (monthly inflation – BNS), unless fuel prices fall. But heating costs will surge again in November – we’re seeing this across all local authorities – as will other energy costs. Monthly and annual inflation will certainly be higher in November and December,” the analyst told BNS.

A. Izgorodinas forecasts that inflation could reach 6.5 or 7 per cent by the end of the year – driven further upwards by rising oil and gas prices.

“I believe there will be a further escalation of the conflict in Iran in November or December, and the price of oil may rise slightly further. Another factor is that the price of gas in Europe is breaking records practically every day. They are now very close to 100 euros per megawatt-hour, and with cold weather arriving in Europe, gas prices are reacting strongly to this, as gas levels in European storage facilities are very low,“ – the economist told BNS.

According to a Citadele analyst, the time will inevitably come when higher energy prices will start to affect other sectors, primarily food: “Particularly vegetables and meat, as their prices are highly sensitive to electricity costs.”

According to T. Povilauskas, food prices are likely to rise at the turn of the year: “At the end of this year and the beginning of next, food prices will have to rise, as we can see what the prices of natural gas and fuel are. Sooner or later, this will inevitably be passed on to the final price.“

However, according to A. Izgorodinas, the good news is that, so far, there are relatively few signs that higher energy prices in Lithuania will have a greater impact on other sectors.

„Companies are acting cautiously for the time being; on the one hand, they see that consumption is high, whilst on the other, they realise that the scope for raising prices even further is simply very limited, as people will start cutting back on their purchases. So far, we’ve seen that the bulk of the rise in energy costs is simply being absorbed by companies’ balance sheets, rather than hitting consumers’ pockets“, he explained.

The State Data Agency reports that preliminary annual inflation in October, compared with October 2025, stood at 6.1 per cent, whilst monthly inflation – in October, compared with September, stood at 0.1 per cent.

Preliminary average annual inflation – over the last 12 months compared with the corresponding period a year ago – stood at 4.7 per cent.