Estonian inflation accelerates in August

Estonian inflation accelerates in August
By bne IntelliNews September 7, 2017

Estonia's consumer price index (CPI) grew 3.9 y/y in August, data from Statistics Estonia showed on September 7. The reading showed price growth picking up speed by a margin of 0.3pp compared to the annual CPI growth in July to the highest inflation level since October 2012.

Unlike the rest of the region, Estonia has seen its inflation remain elevated through the year so far, with the index growing for a second straight month in August. 

Elsewhere in Central and Eastern Europe, the commodities-driven surge in prices around at the turn of the year has now faded significantly. 

August saw the Estonian CPI in positive territory for the thirteenth consecutive month, after deflation dominated between May 2015 and July 2016. In monthly terms, consumer prices grew 0.4%, 0.3pp slower than the monthly reading in July.

As in July, the annual increase was primarily driven by prices of food and non-alcoholic beverages rising 6.4% y/y, including a 13.2% annual increase in the price of milk, dairy products and eggs. 

An 11.1% y/y rise in the price of alcoholic beverages and tobacco also contributed to the faster growth in headline inflation. There also was a 10.2% y/y rise in the price of diesel fuel and a 9.5% y/y expansion for petrol. Prices in the transport sector grew 4.8% y/y overall.

Estonian CPI finished last year at just 0.1%, below the prediction of 0.5% from the International Monetary Fund and the 0.8% forecast by the European Commission. In line with expectations that global inflation would return with a bang in 2017, Estonia's CPI is on track to see a serious acceleration.

“It has been easier for merchants to raise prices because demand has grown strongly, and economic growth is above the long-term capacity of the economy,” Eesti Pank noted. A hike in excise duties also played a role.

However, the Baltic state’s central bank adds, inflation should fall in the second half of the year because of the high reference base and seasonal factors. “Average inflation in 2017 will still remain above 3%,” Eesti Pank predicted.

Data

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