Estonia's consumer price index (CPI) expanded 0.3% in annual terms in August, data from Statistics Estonia showed on August 5. The country's new excise duty on alcohol and tobacco products contributed to the price growth.
The reading marks an end to a prolonged trend of deflation that had lasted since May 2015. Harbingers of deflation coming to an end were, however, seen in the past few months, as prices dropped increasingly more slowly. The annual growth in August follows a drop of just 0.1% y/y the previous month.
In monthly terms, consumer prices inched up 0.1%, after showing no change in July. The main driver of the small inflation in August were prices of alcohol and tobacco products, which went up 7.8% owing to new excise duty, Statistics Estonia notes.
While the main deflation driver in recent months – prices in the transport sector – fell by 3.6%, automotive fuels within that segment performed patchily. Petrol prices fell 5.4%, but diesel became 3.2% more expensive. Heat prices fell by 9.5%. Meanwhile food prices grew 0.5% and prices of clothing and footwear expanded 5.3%.
Estonian CPI is predicted to finish the year at 0.8%, according to the European Commission’s spring economic forecast. The forecast is a revision from the 1% forecast in winter, but might be on target should inflation become sustained in the Baltic state.