While overall annual inflation in Estonia is starting to slow, consumer prices for food are only just peaking, and the confidence to consume has suffered a heavy blow, Bank of Estonia economist Sulev Pert said, commenting on November consumer price index (CPI) figures published by Statistics Estonia on Wednesday.
The CPI in Estonia increased 21.3 percent on year in November, Statistics Estonia said, with energy, food, services and manufactured goods contributing roughly equally to the increase.
The rate of inflation for energy has slowed gradually in recent months, Pert noted according to a press release. This slowing has been aided by energy bill compensation provided by the government, which will be paid through next March.
Although the prices of food commodities on global markets have been falling since spring, consumer prices for food products are only just reaching their peaks. EU agricultural producers have been put in a more difficult position this year by high energy prices and unfavorable weather, and Estonia did not see its typical seasonal reduction in food and vegetable prices this fall; prices actually rose instead.
The Estonian economy has moved into recession, though households have managed to maintain consumption as usual by tapping into their savings.
Nonetheless, the confidence to consume has suffered a heavy blow, and the first signs of people starting to limit their spending have become apparent. Of service prices, tourism service prices and rents saw the biggest decrease in November, after having driven the rise in service prices since COVID-19 pandemic-related restrictions in Estonia had started to be eased.
Inflation for manufactured goods has remained high in euro area countries, however. Many branches of manufacturing worldwide continue to be plagued by supply difficulties as a shortage of inputs and insufficient supply means that price pressures cannot subside. High inflation is also driving down the euro's exchange rate, and consumers are stocking up on manufactured goods, presumably in fear of future inflation.
Inflation will continue to slow. Average inflation in Estonia this year has nonetheless been very high, reaching nearly 19 percent.
The Bank of Estonia will publish an updated economic forecast together with next year's inflation outlook on December 20.
Editor: Aili Vahtla