Analytics, Energy, Estonia, Inflation, Markets and Companies

Data from Statistics Estonia shows that consumer prices in October were unchanged from the previous month, but they were 0.2% lower than a year earlier. Preliminary assessments indicate that harmonised consumer price inflation for the euro area picked up from 0.3% to 0.4% in October.

Eesti Pank said that much of the fall in the price of the Estonian consumer basket came from lower energy prices, as it had in the preceding months, with electricity 7.6% cheaper and motor fuels 2.8%. The global oil price is down 20% from where it started the year, though the depreciation of the euro against the dollar means that the fall in euro terms has only been 14%. The oil price has mainly fallen because of reduced global demand as the outlook for economic growth in China and the euro area is weaker than was previously expected. Oil prices are also down because of higher production in the USA and because OPEC countries have been prepared to accept lower prices. Markets still expect that the oil price is more likely to rise in 2015, and so the contribution that energy has made to reducing inflation will probably disappear in future.

Eesti Pank said that Russian import restrictions have made things harder for Estonian food production and the impact of this has by now reached producer prices, but it has so far only had a limited effect on consumer prices. Purchase prices for milk from farmers were 27% lower in October than a year earlier, while purchase prices for pork were down 8% over the year in September and prices for beef were down 15%. However, dairy products were 4.6% more expensive in October than a year earlier and meat products 1.4% cheaper.

Core inflation in Estonia without energy and food at 0.4% was higher in October than in the previous month. Manufactured goods fell in price by 0.2% over the year, mainly because prices fell for cars, while prices for services were up 1%. Service price inflation continues to be held back by falling prices for communications and the introduction of free higher education. These factors took 0.6 percentage points off the inflation for the consumer basket as a whole in October.