Data from Statistics Estonia show that consumer prices were up 3.4% over the year in April. A third of that rise came from energy, and mainly from fuels. Prices for motor fuels were kept high by the war in Iran and the interruptions it caused to supplies and the production of oil products in the region of the Persian Gulf.

Diesel is the liquid fuel that has gained most in price. It has wider uses in many areas besides road transport, and the countries of the Middle East have been an increasingly important supplier of diesel fuel for European countries, including Estonia, in recent years. Diesel was more than a third more expensive in April than it was a year earlier. European countries have not been able to replace the lost supplies from the Middle East from their own production or from new supply channels. Petrol, which is a larger part of the consumer basket than diesel, cost 10% more in April than it did a year earlier.

Petrol was as expensive at the start of May in Estonia as it was in Latvia and Lithuania, but diesel was cheaper in Estonia. Although inflation has reduced consumption, there were still signs in March that fear of continuing inflation has prompted stockpiling, and sales of fuels increased.

It will depend on how long the price level remains high, but higher prices for transport fuels may be expected to pass through into other prices. The war in the Persian Gulf region has caused shortages of aviation fuel, but international air travel was still cheaper in April than it was a year earlier and only a little more expensive than in March. If air travel becomes more expensive and less available, interest is likely to increase in domestic tourism and visits to neighbouring countries during the summer holiday season. Rail travel is expected to be cheaper in May, as prices in Estonia for some types of train ticket will be reduced by up to a third.

Food price inflation fell notably in April to 2.6% over the year. Prices fell for butter and pork and rose moderately for several internationally traded products like coffee and cocoa. Prices fell for clothing and footwear among manufactured goods, partly because of competition from cross-border online sellers. The exchange price of electricity was a quarter lower in April than a year previously, but the volatility in electricity prices has encouraged households to fix their prices increasingly, which has limited how price fluctuations affect consumer prices.

Inflation in the euro area was 3% in April, while in Lithuania it was 4.9% and in Latvia it was 3%. Inflation in Estonia will continue to be pushed up until July by the rise in VAT last year. The rate of inflation in Estonia at constant tax rates has been one of the lowest in the euro area in recent months.

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