Inflation continued to slow in March
Economist at Eesti Pank
Data from Statistics Estonia show that yearly consumer price inflation slowed in March to 15.3%. Prices were 0.7% higher than in February. The biggest rise was that caused by the seasonal increase in food prices, but energy prices continue to fall.
The increase over the year in food prices was very large at 25%, but price pressures are weakening. Prices have fallen on European food commodities markets in recent months for cereals and milk powder, but inflation remains high for meat products. The farm-gate price of milk in Estonia has fallen by 13% over the past three months, but the same price has dropped by 30% in Latvia and Lithuania in a couple of months. There is probably room for the price to fall further in Estonia as well. Weaker price pressures have been evident in producer prices for food as well as in commodities prices. Producer prices in Estonia were 0.2% higher in February than a month earlier, which is the smallest increase in more than a year. Inflation in the consumer food basket is expected to fall to close to 5% by the end of the year.
The purchasing power of consumers will improve this year. The labour market continues to do well despite the downturn in the economy, as is illustrated by unemployment remaining low. Wage growth will remain high this year, and is forecast by Eesti Pank to be 11%. Inflation will slow for the year as a whole to 9% meanwhile, and so the purchasing power of consumers will continue the recovery that started at the end of last year.
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