March price increase higher than expected
Martin Lindpere, Eesti Pank, economist
The price growth in March was mainly brought about by the seasonal rise in the cost of food, the surge in energy prices and the end of several discount campaigns. According to Statistics Estonia, the cost of the consumer basket went up by 1.3% on February and by 1.7% compared to March 2009.
A significant component to raise the March price level was the seasonal increase in the price of fresh vegetables, which accounted for nearly a quarter of the month-on-month price advance of the consumer basket. Weather conditions had a role to play here as well.
A surprising development was the growth in the prices of mobile communication services - these increased by almost a tenth, making up some 20% of the price surge of the consumer basket.
The rapid price rise of energy carriers in the second half of 2009 passed through to the cost of thermal energy sold in Estonia in March. As a result, the cost of the consumer basket advanced by 0.2%. The price of gas sold to households rose at the start of April. In addition, motor fuel retailers have also repeatedly raised prices over the past couple of months.
Besides administrative measures, the global prices of energy and food are important factors affecting further price level changes in 2010.
The March price hike, which was more extensive than expected, reflects the price volatility characteristic of a small and open economy. Prices must continue to adjust against the background of the deep economic contraction.
Eesti Pank's spring forecast complete with the inflation assessment will be published on 20 April.
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