According to data provided by Statistics Estonia, in August 2022, the consumer price index increased by 2.3 percent from July, and by 24.8 percent when compared to August 2021. Goods were 18.3 percent more expensive this August than at the same time last year, with services costing 37.6 percent more than in August 2021.

Viktoria Trasanov, leading analyst at Statistics Estonia, said that, compared to August 2021, the consumer price index was affected most by housing-related price changes, which contributed over 40 percent of the total rise. "Electricity that reached homes was 205.9 percent more expensive, with the costs of heat energy (61.7 percent), gas (244.2 percent), and solid fuels (100.0 percent) also significantly higher," said Trasanov.

"Price changes to food and non-alcoholic beverages, as well as transport, accounted for one fifth and one seventh of the total rise in the index, respectively. Petrol was 30.5 percent more expensive on year, and diesel fuel costs 46.9 percent higher," added Trasanov.

Among food products, the biggest increase on year was seen in the price of sugar, which grew by 81.2 percent, according to Statistics Estonia. Considerable price rises also affected flour and cereals (75.2 percent), spices (57.6 percent), other edible oils (56.5 percent). Eggs were also 50.9 percent more expensive in August 2022, than in the same month last year.

When comparing the consumer price index for August with the data for July 2022, price changes related to housing and food had the biggest impact. According to Statistics Estonia, petrol prices fell by 6.3 percent, and diesel fuel was 8.2 percent cheaper in August than in July. The data was also influenced by the ending of many sales on clothing and footwear in the retail sector while personal hygiene and wellness products increased in price by 9 percent from July.

Bank of Estonia: Energy prices hit new records

Inflation continued to accelerate in August as the prices of natural gas and electricity hit new records, writes Bank of Estonia economist Sulev Pert.  

Half of the inflation was caused by energy prices, as electricity prices were 206 percent higher than a year earlier, while natural gas prices were up 244 percent.

Higher prices for food commodities and higher processing costs are feeding increasingly into the retail prices of food. Inflation for food prices increased to 21 percent in August.

Prices for food have risen a little more slowly in Estonia than in the other Baltic states though. One reason for that may be the tight competition, especially since the Lidl chain entered the Estonian market.

There are differences in how food prices have risen in the Baltic states, as dairy prices in Estonia have risen notably more slowly, but prices for fish products have risen notably faster. Food prices may rise further because the excessively hot weather in Southern Europe this year has reduced harvests.

Prices for services have mainly risen because demand has been very strong. The tourism sector has recovered after the Covid restrictions were released as households can use the savings they built up earlier for traveling. Costs have risen for tourism companies because wage growth in the sector has become very fast, and there are signs of higher fuel prices being passed through into transport prices.

The rental market has also exited its pandemic slump. Rents were up 29 percent over the year in July in Estonia, which was the largest increase in the euro area.

As the rate of growth in the Estonian economy has slowed, companies are finding it harder to raise prices. Rapid wage growth and high energy prices are causing strong cost pressures for businesses. Inflation will slow at the end of the year as the new government plans to compensate household consumers for part of the cost of energy.

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