Inflation was at its lowest for two and a half years in April
Head of the Economic Policy Division, Eesti Pank
Information from Statistics Estonia shows that inflation fell in April from 3.5% to 3.1%, which is its lowest rate for two and a half years, while the consumer basket was 0.1% cheaper than in March. A notable feature in price developments in April was the volatility of energy prices, and about one third of inflation was caused by the rise in the electricity price to a level 28% higher than that of last April. In contrast, motor fuels had a braking effect on inflation as the oil price on world markets fell by around 6% from its level in March, making the price of motor fuels in Estonia 6.6% lower than a year ago. Elsewhere, the cheaper prices for energy slowed inflation in the euro area to 1.2%.
Food price inflation in April was 5.2%, and the price rises for food, tobacco products and alcohol made up more than half of total inflation. The high comparison base from last year means that a temporary slowdown in the rise of food prices is to be expected in the coming months, but then a strengthening of demand in world markets could accelerate food price rises and make them broader-based.
Core inflation without food and energy remained low in April at an annual 0.9%. It was held down particularly by lower prices for communications services and manufactured goods, including durables like home electronics and cars. The reason for this was weak global demand and the strengthening of the euro against the currencies of Asian countries. An exception among manufactured goods was clothing and footwear, which increased in price by 5.3%. In the last year, Estonia has seen the fastest rise in the prices of clothing and footwear of any country in the European Union.
The Eesti Pank forecast of December 2012 predicted an average rise in the harmonised consumer price index of 3.6%, but price increases in the first months of the year have been lower than expected. Eesti Pank will publish its next economic forecast on 12 June 2013.
The primary role of the central banks of the euro area is to maintain inflation in the euro area at below but close to two percent over the medium term. The fact that Estonia's inflation is slightly higher than the euro area average is to be expected and is a consequence of faster economic growth and the harmonisation of relative incomes with those of the euro area
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