According to Statistics Estonia data, while prices were 0.7 percent higher than in February, annual inflation of the consumer price index (CPI) nonetheless slowed to 15.3 percent this March. With wage growth set to remain high and inflation expected to slow this year, Estonian consumers' purchasing power is expected to improve this year, Bank of Estonia economist Sulev Pert said.
The biggest increase was the one caused by the seasonal increase in food prices, but energy prices in Estonia continue to fall, Pert said according to a press release.
The increase on year in food prices was very large at 25 percent, however price pressures are weakening, he continued. Prices for cereals and milk powder have fallen on European food commodities markets in recent months, but inflation remains high for meat products.
The farm gate price of milk in Estonia has fallen by 13 percent over the past three months. In Latvia and Lithuania, meanwhile, the price of milk has dropped by more than double — 30 percent — in just a couple of months. There is likely room for milk prices to fall further in Estonia as well.
Weaker price pressures, meanwhile, have been evident in producer prices for food as well as in commodities prices. Producer prices were 0.2 percent higher in February than in the previous month, which is the smallest increase Estonia has seen in more than a year. Inflation in the consumer food basket is expected to fall to close to 5 percent by the end of 2023.
The purchasing power of Estonian consumers will improve this year as well, the Bank of Estonia economist noted. The labor market continues to do well despite the downturn in the economy, as illustrated by unemployment remaining low. Wage growth will remain high this year — totaling 11 percent, according to the central bank's forecast. Inflation will slow for the year as a whole to 9 percent, meanwhile, which will see consumers' purchasing power continue the recovery it first began at the end of 2022.
Editor: Aili Vahtla