Rising food prices are starting to push up inflation

Autori Sulev Pert pilt

Sulev Pert

Economist at Eesti Pank



Yearly growth in consumer prices accelerated to 1.9% in April, with more than half the rise coming from energy prices. The general price level in Estonia is now as high as it was in summer 2019.

The long cold spell this year meant that electricity prices were 20% higher over the year. The highest rises in services prices were for medical services and social care, but prices for tourism services remained depressed because of the Covid-19 pandemic. Inflation for consumption goods has been driven in recent months by higher prices for cars, especially used cars, which were up 4.4% over the year. This was offset by the unusually sharp drop in prices for clothing and footwear of 3.4% over the year.

Consumer prices for food products have this year remained close to where they were last year, but the higher global prices for commodities will soon reach consumer prices. Prices for food commodities have risen partly because of increased consumption in Asia, and because of expectations that the coronavirus crisis will soon be over. Producer prices for food products in Estonia, which are the farm gate prices of food producers, were still 1.2% lower in March than they were a year earlier.

The coming rise in prices for food products may be restrained a little because the price level of food products in Estonia is already as high as it is in other European countries, given it was 97% of the EU28 average in 2019. Meat products are a little less expensive in Estonia, but some dairy products are already more expensive. The rise in prices may be restrained by the arrival in Estonia of the Lidl supermarket chain. The rapid rise in consumer prices for food products in the past decade was caused by increases in excise on alcohol and tobacco, but those increases will probably be smaller in future. The intense trade in goods with Finland will contribute to continuing price rises though, as the price level of food products is around 20% higher in Finland than in the European Union on average.

Additional information:
Ingrid Schmuul
Communications Specialist
Eesti Pank
Tel: 668 0965, 5697 9146
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