The price level rose by almost one per cent in a month
Economist at Eesti Pank
- Prices of energy and services rose by most over the month
- The electricity bill for a household with average electricity consumption may be 4-8 euros higher in the winter months
- Prices for services rose because of rapid growth in wages
Data from Statistics Estonia show the consumer basket was 4% higher in price in June than a year earlier. The price level was 0.9% higher than in May because prices rose for energy and services. Energy prices increased mainly because of higher oil prices on the world market, while services prices were up because of strong growth in wages.
Energy prices have been lifted in recent months by higher prices for solid fuels and motor fuels. On top of this came a rise of 9% in the price of electricity in June, which raised the price of the consumer basket by 0.3%. Futures prices for electricity on the Nordic electricity exchanges indicate that the current high price of €50/MWh will be maintained until the start of next year. The electricity bill for a household with average electricity consumption could be 4-8 euros higher in the winter months in consequence. While the price of electricity is higher in the consumer basket, prices of other groups of goods will also rise as production costs are pushed up by the electricity price. This indirect effect will raise the price level only a little, as electricity is only a small part of the expenditures of businesses. Markets expect that the electricity price on the exchanges will fall in spring next year towards its average of the past decade of €35/MWh.
Inflation is expected to slow in Estonia in the second half of the year as the high reference base effect will be felt in inflation. The price level will rise for the year as a whole by around 3%.
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