Energy prices continue to set the rate of inflation
Economist at Eesti Pank
Data from Statistics Estonia show that consumer prices were 2.3% higher in March than a year earlier. Inflation has been slowed in recent months by the price level of electricity, which fell 11% in two months. At the same time, inflation has been pushed up by prices for motor fuels, which have risen by 6% in the same months.
Changes in fuel prices on global markets make inflation volatile. The price of crude oil fell 30% in the fourth quarter of last year, but it has bounced back by 17% in 2019. Prices have also risen for motor fuels because the exchange rate of the euro has fallen. The recent information about the state of the economy in the euro area has not all been favourable, and this has contributed to the euro weakening.
Without the volatile energy components, the rest of the consumer basket has risen in price moderately. Rapid wage growth is driving service prices up and prices for leisure services rose most in March. The rise in prices for services has been partially offset though by lower prices for imported manufactured goods. Clothes and shoes have become cheaper because of this in recent months.
While prices in Estonia were rising by 2.3%, inflation in the euro area averaged 1.4%. Eesti Pank forecasts that the average inflation for Estonia in 2019 will be 2.2%.
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