Estonian inflation defies forecasts for continued slowdown in April

Estonian inflation defies forecasts for continued slowdown in April
By bne IntelliNews May 8, 2017

Estonia's consumer price index (CPI) grew 3.2% in annual terms in April, data from Statistics Estonia showed on May 8.

The reading shows inflation accelerating by a margin of 0.4pp compared to the annual result in March. That is out of line with regional inflation forecasts that the commodities-driven surge seen in Central & Eastern Europe at the turn of the year would continue to fade after easing in March. The rebound in April was driven by rising prices in the food and transport sectors.

April saw Estonian CPI in positive territory for the ninth consecutive month, after deflation dominated between May 2015 and July 2016. In monthly terms, consumer prices gained 0.3%, the same rate as the previous month.

The annual increase in April was primarily driven by rising prices of food and non-alcoholic beverages, which grew 4.5% y/y. A 20.6% annual growth in the price of diesel and 14.2% expansion in the price of petrol also contributed. Prices in the transport sector grew 5.5% on the year overall.

Estonian CPI finished last year at just 0.1%, below predictions of 0.5% from the International Monetary Fund or the 0.8% forecast by the European Commission.

In line with forecasts that global inflation will return with a bang in 2017, Estonia's CPI is likely to see a serious acceleration this year. The pace is set to be even higher than the average for the Eurozone, suggests Eesti Pank, primarily because of rises in excise duties. The central bank plots average inflation for 2017 at 2.8%, the same as the European Commission.