The factor affecting price levels most is still energy
Economist at Eesti Pank
- Consumer prices fell by 0.7% in September
- Cheaper energy products brought inflation down by 1.6 percentage points
- Core inflation picked up to 1.1% in September
- Stronger competition may have slowed inflation in clothes and shoes
Data from Statistics Estonia show that consumer prices were 0.7% lower in September than a year earlier, which is a larger decline than the 0.3% seen in August. The fall in the price of the consumer basket was mainly accelerated by energy products, which contributed 1.6 percentage points to the fall in inflation.
Core inflation, which is inflation in the consumer basket without energy and food, has increased steadily throughout this year, and reached 1.1% in September. Core inflation in the euro area as a whole also remained close to 1%, though the average harmonised consumer price index still fell by 0.1% in September. The main cause of the fall in the price of the average consumer basket in the euro area was also cheaper energy.
Prices for food including alcohol and tobacco rose by 1% in Estonia in September, but without tax rises the consumer’s food basket would have been 0.5% cheaper than a year ago. Food prices fell most for milk and dairy products and for meat and meat products. Falling farm gate prices mean that dairy prices are down across the European Union, while Estonian has seen the largest drop in meat prices of any country in the euro area.
It has been notable in Estonian consumer price statistics in recent months that prices for manufactured goods are lower than a year earlier, while inflation for manufactured goods has been accelerating in the euro area. This is mainly because prices for cars have fallen sharply, though also because inflation for clothes and shoes in Estonia has been lower than usual. One reason for that could be that new commercial premises have been added and competition has sharpened. Although e-commerce is growing rapidly, the turnover of postal sales is still small and accounts for only around 4% of sales of manufactured goods. Widespread access to the internet has led to strong growth in the number of people who have made purchases online within the past year.
Services prices in Estonia continue to rise faster than those in the euro area by one percentage point, and the rate of rise increased to 2.4% in September. Communications services contributed more than before to the rise in prices in September, climbing 3.3% over the year.
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