Consumer prices fell in October because of seasonal factors
Economist at Eesti Pank
Data from Statistics Estonia show the price level in Estonia in October was 0.4% lower than in September. The overall level of prices in Estonia has been essentially unchanged for the past half year. Inflation over the year still rose to 4.9% in October because of the compensation for energy prices that was introduced last October.
Seasonal factors in the autumn months are the usual falls in the prices of food and of tourism services. Lower prices for fruit and vegetables and for dairy products made the consumer food basket 1.1% cheaper than it was in September. Further falls in consumer prices for food may be contained because the prices of some food commodities on global markets have already started to recover by now.
Falling prices for energy, especially electricity and gas, have been one of the main drivers of the reduction in inflation this year. The market price of electricity, which exceeded 174 euros per megawatt-hour last year, was 87 euros in October. The price of natural gas has risen since the summer though and so the price of heating fuelled by gas will probably increase in the coming months.
Eesti Pank estimates that inflation will be 4-5% in the final months of this year and that it will average 9.4% for the whole of 2023. The rise in price that will be sparked by tax changes from the new year may start to be reflected in prices in shops in the months ahead unless the economic downturn in Estonia pushes merchants to change their pricing policies. Eesti Pank forecasts that inflation will come down next year to 3.4%.