CPI inflation amounted to 3.4% y/y and -0.1% m/m in July 2013 (3.8% y/y and 0.5% m/m in June), Statistics Estonia reported. Prices growth moderated in July. Previously accelerating in February to 3.7% y/y on high food prices, consumer prices declined for two consecutive months and rebounded slightly in May.

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 July was mostly influenced by housing expenditures that increased by 8.4% y/y and gave about 40% of overall increase. Housing prices, same as in previous months, were influenced by 80% y/y hike in electricity prices (electricity prices jumped in the beginning of 2013 after total de-regulation of the electricity market). Food prices growth of 5.2% y/y accounted for about 40% of consumer prices’ growth in July. Food inflation was due to higher prices on vegetables.  

Goods were 3.1% and services 4% more expensive y/y, while regulated prices went up by 1.1% and non-regulated prices by 4.2% y/y in July.

The Bank of Estonia last month commented that electricity price was to blame for accelerating inflation figures in May-June. At the same time the central bank believed that risks to price stability increased both externally and domestically. 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. July’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%).