Data from Statistics Estonia show the consumer basket was 3.7% higher in price in May than a year earlier. Inflation was driven above all by higher prices for motor fuels.

The price of diesel rose particularly fast and was 32% higher in May than a year earlier. Diesel in the European Union depends more on imports than petrol does, and difficulties in supply have kept the refining margin on it high. The market is very sensitive to news from the Middle East and there is a lot of uncertainty about future developments. The oil price on global markets has consequently fluctuated in recent months in a wide range of 90-120 dollars a barrel. Rises in fuel prices have been kept in check to some extent in Estonia by a price war between rival chains of filling stations that started last autumn.

Inflation for food was high at the start of the year at 6%, but it has come down quickly in recent months and was 2% in May. Lower prices on global markets for food commodities have led producer prices and import prices for food to fall. It is mainly prices for butter and dairy products and for cereals that have fallen, because the grain harvest around the world was good last year. Prices have started rising though for oil crops because increasing use has been made of biofuels as a consequence of the high oil price.

Prices for manufactured goods did not particularly change over the month and rose by 0.9% in May. Clothing and footwear continued to fall in price, but the effect of electronics becoming more expensive is increasingly evident in the consumer basket. Memory storage devices have seen one of the largest rises in price in the consumer basket with a jump of 37%. This is partly because of the strong demand from artificial intelligence for chips, and partly because production capacity is limited. Developments in technology and the increasing capabilities of devices have helped offset some of the rise in prices for inputs for electronics and computer goods.

The path of change in prices in the coming months will depend largely on the prices of services as the holiday season is starting. Prices for leisure services went up faster in Estonia last summer than in other countries in the euro area because several large events were held. Seasonal inflation is likely to be lower this year, and the 1.5 percentage points of inflation that come from the rise in VAT last year will pass out from inflation.

Additional information:
Hanna Jürgenson
Communications officer
Eesti Pank
Tel 5692 0930
Press enquiries: [email protected]