Data from Statistics Estonia show that the consumer basket was 1.1% lower in price in September than in August, which was mainly because of cheaper motor fuels and seasonal factors. Yearly inflation was at 5.2% in September.

Food prices were 7.7% higher in September than a year previously as the earlier rises in the prices of food commodities on global markets passed through into retail prices after a long lag. Increased expenses led retail chains to increase their mark-ups as well. Ten years ago merchants added 18% to the wholesale prices they paid for purchases to cover costs and earn profits, but they are now marking prices up by 26%. Profitability in retail has however declined as the arrival of new shop chains has tightened competition in the fight for market share. The rapid development of online e-commerce has not favoured retail sales of manufactured goods.

Half of the fall in the consumer price index over the month came from motor fuels becoming 11% cheaper. This is partly because the appreciation of the euro has pushed down the price of oil, but also because petrol stations cut their fuel prices one after another in early September. At least one chain of filling stations stopped offering promotional prices for customers with loyalty cards and instead cut its prices for all customers, and so the fall in the consumer price index was largely statistical as client discounts are not reflected in the price statistics.

A lot of prices for services fell for seasonal reasons in September. Prices for package holidays, accommodation services and air tickets depend increasingly on national holidays and school half-terms, and prices can fluctuate by more than a third from month to month. The large variability in prices makes it ever more important for consumers to time their purchases carefully.

The Eesti Pank forecast expects that consumer prices will rise by 5.3% this year, but inflation will slow to 3.1% in 2026. Inflation coming down will need growth in the economy to accelerate and productivity to increase, as this would help offset the cost pressures coming from higher wages and so help make companies more competitive. Additional price pressures will come in the years ahead from the large budget deficit and the consequent additional injection of funds into the economy.

Additional information:
Viljar Rääsk
Head of Communications
Eesti Pank6680 745, 5275 055
Email: [email protected]
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