Statistics Estonia indicates that consumer prices increased 18.6 percent over the year in January. Inflation in January reflected primarily the price increase in the first half of last year, as the price level of the consumer basket has remained relatively unchanged since August, writes Sulev Pert, economist at the Bank of Estonia (Eesti Pank).
In January, food inflation hit 24 percent annually. The new pricing pressures came from rising meat prices and the end of alcohol sales promotions. Prices on the European market for a variety of food items, including cereals, butter, and milk powder, have dropped below their all-time highs and may soon begin to decline.
As it takes time for decreasing commodity prices to be reflected in consumer pricing, the food basket will be 10 percent more expensive on average this year.Despite state support that kept rising prices in check, energy prices were 33 percent higher than a year ago.
Because market prices for gas and electricity have fallen in recent months, there has been less need for compensation, as well as less cost pressure on the state budget.
Core inflation, which is more persistent and does not include food or energy, is not yet showing any sign of coming down. There were fewer discounts offered this year for clothing and shoes than a year earlier. Communications services providers have raised prices among services.
As families continue to reduce their spending on consumption, the demand pressure on prices as a whole is decreasing. The modest drop in inflation will continue in the next months, and the Bank of Estonia (Eesti Pank) predicts that this year's average annual inflation rate will be 9.3 percent.
Editor: Kristina Kersa