Inflation in 2012 was driven by external price factors
Head of the Economic Policy and Forecasting Division, Eesti Pank
Data from Statistics Estonia show that consumer prices rose by 3.9% in 2012. The increase in prices was largely driven by events in external markets, including the growth in the price of crude oil in the global market for the third year in a row. Prices for energy rose at a rapid rate, with prices increasing for thermal energy by 14.4% and for electricity by 10.7%. Food prices saw a lot of volatility in inflation last year as food commodity prices fell in the global market in the first half-year but then suddenly started to rise steeply as a consequence of bad weather conditions in many regions of the world.
Consumer prices in December were 0.1% down on the previous month, mostly owing to a drop in the prices of motor fuels and alcoholic beverages. On an annual basis inflation slowed to 3.5% in December and there were no major changes in its structure, with higher prices for food and housing costs the main causes of rising prices. Core inflation remained stable at 1.3%. Preliminary data show that inflation in the euro area was 2.2% in December.
The Eesti Pank harmonised consumer price inflation forecast for 2013 expects inflation to be 3.6%. Consumer prices will be affected in the first half of the year by the rise in electricity prices in January, and also by the increase in alcohol and tobacco excise. Inflation will slow in the second half of the year, provided that commodity price pressures ease.
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