Analyst: Food price rises likely coming to an end

A customer at a checkout.
A customer at a checkout. Source: Priit Mürk/ERR

Estonia's consumer prices rose 0.8 percent on month in June and food prices were the main factor. But prices may stop rising in the near future, said analysts.

While Estonia's annual inflation fell to 8.99 percent, according to preliminary data, consumer prices starting to rise again is a cause for concern, analysts told Friday's "Aktuaalne kaamera".

"A lot is influenced by the reference base. After all, we had record inflation last summer, but if I look at the month-to-month number, the initial estimate of 0.8 percent, that's a lot. The April-May month-on-month price change was 0. There was a little hope that maybe it would stay that way. Today it's 0.8 again. If you multiply that by 12, you get a very decent inflation number," said SEB economic analyst Mihkel Nestor.

Lenno Uusküla, chief economist at Luminor Estonia, said: "If you deduct seasonal factors related to restaurant and hotel prices, half of this - 0.4 percent - still gives an annual inflation rate of five percent, which is too high for Estonia."

But Nestor was more optimistic about food prices.

"For food, I am hopeful that it will get better. If we look at Europe, the major food price increases are starting to stop. In Germany, food prices have even started to fall in some categories. But the service sector right now is in high demand across Europe," he said.

But wage growth has begun to outpace price growth again.

"The worst is over because the big price hike of 1 to 2 percent a month is over. And the other part is that wages are rising. And if you look at it on a year-on-year basis, wage growth has outpaced price growth, which means that the average wage in Estonia now buys more than it did a year ago," Uusküla said.

But he also said wage growth is unevenly distributed, which worsens economic inequality.


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Editor: Merili Nael, Helen Wright

Source: Aktuaalne kaamera

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