SEB: Rapid inflation relates to low 2020 reference base

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Two two-euro coins in a vice (photo is illustrative). Source: Siim Lõvi/ERR

Inflation of close to four percent on year to June is primarily down to the low reference base in 2020, the year the coronavirus arrived, according to one expert.

SEB economic analyst Mihkel Nestor told BNS that: "The growth in consumer prices clearly reflects the recovery of the economy from the coronavirus crisis."

The consumer price index (CPI) increased in June by 3.8 percent compared with June 2020, and by 1.2 percent between May and June this year, according to state agency Statistics Estonia.

Meanwhile, goods were 3.1 percent more expensive than they were in June last, while services rose by 5 percent over the same period.

"Whereas in June this year, housing costs grew by 8.2 percent, and expenditure on transport by 10.6 percent, year-on-year, in June 2020, these were in decline by 3.5 percent and 7 percent respectively," Nestor added, according to BNS.

This will continue through to year end, he continued. "Rapid growth in consumer prices will also continue in the second half of the year. In addition to last year's low reference base, price growth will also be boosted by the sums to be withdrawn from the second pillar pension fund, which will sharply increase households' demand."

Eating out has become more expensive for the first time in over a year, he added, while clothing and recreational activities also cost more, suggesting that demand for these has returned to its pre-crisis levels, Nestor said. 

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Editor: Andrew Whyte

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