Inflation was slowed by energy and food products in October
Economist at Eesti Pank
The yearly growth in the Estonian consumer price index slowed from 2.2% in September to 1.6% in October. Inflation fell because prices fell for energy and rose more slowly than previously for food products.
Inflation was lower in October for groups of goods and groups of services. The annual rate of growth in energy prices fell for the first time in a long time as motor fuels and heating energy became cheaper. Prices rose more slowly for food products, even though retail prices for meat products were up strongly in October following the wave of price rises that had earlier started in Asia.
Services prices continue to go up relatively fast as the labour market is tight and wages are rising rapidly. Package holidays were 37% more expensive than a year ago, which added 0.4 percentage point to overall CPI inflation. The school half-term holiday pushed the prices of air tickets up by 15% over the month, though this was less than the increase last year, which meant that air tickets slowed the general rate of inflation over the year.
Inflation slowed in the euro area to 0.7% in October, and southern Europe saw deflation in Greece, Portugal and Cyprus. One cause of low inflation in the euro area has been weak economic growth. International trade tensions have further reduced economic activity around the world.
Eesti Pank forecasts that consumer prices will rise by 2.3% in 2019. Several one-off factors will affect inflation in the months ahead, making prices more volatile. Tallinna Vesi will cut its prices in December, but there will be a rise in network fees for natural gas in January. Given the current economic context, inflation will remain modest next year at around 1.9%.
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