Banks, Direct Speech, Estonia, Inflation

International Internet Magazine. Baltic States news & analytics Thursday, 16.08.2018, 14:37

Inflation was affected substantially in July by higher prices for motor fuels and electricity in Estonia

Sulev Pert, Economist at Eesti Pank, 09.08.2018.Print version
Inflation slowed to 3.5% in July. Prices continued to rise rapidly for alcohol even without the effect of higher excise. Seasonal discounts for manufactured goods offset higher prices for services. Unfavourable weather means prices for grain and vegetables may rise in Europe in the winter

Data from Statistics Estonia show that the consumer basket cost 3.5% more in July than a year earlier. Inflation in Estonia was notably faster than the euro area average of 2.1%, and than the 2.7% in Latvia and 2.1% in Lithuania.

Around half of inflation came from the rises of 18% in prices for motor fuels and of 17% in the price of electricity. Inflation for food other than alcohol and tobacco slowed to 1.7%. Food price inflation continues to be led by higher prices for alcoholic drinks. While prices have risen for wine this year in all the countries of Southern Europe, alcohol prices in Estonia have been raised further by higher mark-ups for companies. Data for June show alcohol was 7.5% more expensive in Estonia without the effect of taxes, and 1.7% more expensive on average in the European Union.

Preliminary estimates for the harvest in agriculture are usually released in July, and they are then reflected in prices on global markets. Higher prices for vegetables and grain because of the bad weather in Europe may cause inflation to increase in the winter months. Higher prices for vegetables lifted inflation by more than one percentage point in the winters of 2010 and 2012.

The consumer basket without food and energy rose in price by 1.3% over the year. Inflation continued to increase for services in July, but this was offset to some extent by the introduction of free public transport, which reduced inflation by 0.1 percentage point, and by widespread sales for manufactured goods.

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