Martin Lindpere, Eesti Pank, economist

In August, price level in Estonia rose 0.1%, which is the lowest monthly price growth of the past couple of years. Year-on-year, prices changed 11%.

Fresh domestic food, which reaches markets in August, causes prices to fall. The poor crop of this year has influenced but not ruined the seasonal regularity of prices. In August 2008, the price of fresh vegetables dropped by 16% and the expenditure on food declined by 1.2%.

In addition to the seasonal cheapening of food, also motor fuel price fell by 5% in August. Month-on-month, this is a historically remarkable downward correction.

At the same time, it could be observed that the rise in excise duties which came into effect in July started to feed into the prices of tobacco and alcohol, raising the general price level by 0.5%. Without the hike in excise duties the price level of August would have dropped by 0.4%.

Leaving aside food and energy, the price growth of services and manufactured goods continued to slow as expected. Whereas the prices of food and energy move erratically, the inflation of services is more inert and withdraws gradually. Durable goods have recently started to boost the slowing of price growth, cheapening from January to July by 4.1%, to a great extent owing to the favourable USA dollar exchange rate. In the same period last year the reduction in prices constituted 2.6%. Owing to the decline in the dollar exchange rate, the prices of electronic products imported from outside the EU dropped most of all. Home electronics cheapened in the first half of the year an average of 14.5%.

Eesti Pank's autumn forecast is published on 22 October.