Kaspar Oja, the economist at Eesti Pank who carried out the analysis, said that input prices have increased, but that they have also increased because someone has increased their profit margin somewhere along the supply chain.

"Greedflation" is now the international term for the practice of rising profits in the face of rapid price increases.

"Because people have accepted that inflation is high and prices are rising, there is an opportunity for those who may not have had a compelling reason to increase their prices to do so. It's good fishing for them in these murky waters, Mihkel Nestor, an analyst at SEB, described the situation.

Higher corporate profits in real estate, energy, banking, commerce and lodging have fueled price hikes.

"The hospitality industry is an example of a sector whose output took a big hit during the crisis. You might believe that if there is less demand for your product, your profits will be lower than they were during prosperous times. In recent years, it has been the case that the volume of a number of industries has decreased while their profits have not. If volume declines while profits remain unchanged, prices must have been hiked," Oja explained.

Banking and trade have contributed 25 percent of the impact of profits on inflation. Nestor, however, defended the banks that make huge profits.

"Generally speaking, Estonian banks are very profitable. But this is to remind you that there are countries in which banks are not doing well, and I would not want to keep my money in one of these banks. If we look at Southern Europe, it is evident that banks are experiencing difficulties with making ends meet. Usually, the repercussions of this are significantly more serious than the bank's profits," he said.

The energy and real estate sectors indicate that their price increases are 50 percent based on rising profits. In the real estate industry, accelerated price increases began in the spring of 2021 and halted in the summer of last year. During this time period, prices increased by an average of 20 percent. Over the past three years, the profits of a residential real estate developer, Liven, have remained constant at about 10 percent.

"Being at the forefront is barely possible, and is mainly linked to projects that were probably built earlier at cheaper construction prices. Then it was possible to raise prices until there was a deficit, because there were fewer goods, and also to make a bigger profit.," CEO of Liven a residential real estate developer, said.

Real estate price increases have now slowed. Also, in other sectors the party is coming to an end and profits should start to decline.

"At the beginning of July, the situation is not so good. Even the turnover of trading companies has started to fall. And the drop in turnover is already a noticeable one for the companies themselves," Nestor said.

--

Follow ERR News on Facebook and Twitter and never miss an update!