Price growth is slowing down in the euro area and in Estonia
According to Statistics Estonia, consumer prices were up 2.2% from last year in September. Price hikes are declining however, both in the euro area and in Estonia. Inflation in the euro area fell from 1% in August to 0.9% in September, but inflation in Estonia fell from 2.4% to 2.2% in the same time span.
Trade tensions have caused a lot of uncertainty in the global economy, and this has decelerated price growth on foreign markets. The situation in Estonia is worsening as well, since the cooling of economy is usually transmitted into prices over a few quarters. Difficulties in the exporting sector of Estonia may soon pass on more strongly into the domestic economy, but it will take some more time before worsening economic conditions start affecting service prices as well.
The price hikes in Estonia were smaller in September because of slower growth in energy and food prices. However, in conjunction with the business cycle, the price growth in services and consumer goods continued at 2.7%. The labour market has stayed strong, the unemployment rate is low and wages are growing quickly.
Eesti Pank’s forecast expects consumer price inflation in Estonia to be 2.3% in 2019 and to hover around 2% in 2020 as well.
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