The CPI inflation in August moderated to 2.9% y/y compared to 3.4% y/y seen in July, Statistics Estonia reported. In m/m terms, the change of the consumer price index was 0.0%.

To remind, average consumer price increase for 2012 overall stood at 3.9% y/y, while in 2011 average inflation was 5%, in 2010 average inflation was 3% vs. 0.1% deflation in 2009 and 10.4% inflation in 2008.

Consumer price inflation in August was mostly influenced by goods price that rose by 2.3% y/y and services 4.1% y/y. Regulated prices of goods and services have stayed on the same level and non-regulated prices have risen by 3.9% y/y. In addition, housing expenditures and food gave about half of total increase. The electricity prices rose by 28.4% y/y, accounting for 80% of the impact of housing expenditures. In August 2013, motor fuel was 4.7% cheaper than the year earlier.

In August compared to July, the consumer price index was mainly influenced by the 16% price decrease of vegetables, 2.9% price increase of heat energy, termination of sales of clothing and 15.8% price increase of plane tickets. Onions were 30% more expensive than in July and paprika 56% cheaper.

Improved outlook on external growth in H2/13 might raise the prices of imported raw materials. Domestically higher labor costs in H1/13 could pressure prices upwards, especially through services. August’s data did not yet confirm these concerns. Last month the CB reiterated its 3% average HCPI forecast for 2013 (revised downwards in June from previous 3.6%).