Consumer price index rises 2.8% on year in January

The harmonized consumer price index remained at the same level in January compared to December, preliminary data from Statistics Estonia shows. Compared to January of the previous year, prices increased by 2.8 percent.
While the consumer price index is calculated based on Estonian residents, the harmonized index also takes tourists into account. This makes it comparable to the international harmonized consumer price index, the agency said.
Lauri Veski, head of the consumer price team at Statistics Estonia, stressed that caution should be exercised when interpreting January's harmonized consumer price index flash estimate. Not all necessary weights have been finalized, she said.
Lenno Uusküla, chief economist at Luminor Estonia, said the annual price increase of 2.8 percent is a significant drop compared to December's 4.1 percent.
"The large difference comes from the fact that in January of last year, the VAT rate was raised, and prices increased accordingly at that time. Now, the VAT-related price increase is no longer reflected in the annual comparison, and other economic factors, such as wage increases, rising costs, and cheaper Chinese imports, have a greater influence on annual inflation," he said.

Uusküla considers the lower price increase at the beginning of the year to be good news for Estonian consumers. He pointed out that new prices are often introduced in January, which usually results in noticeably higher costs due to previous price adjustments being postponed.
"Since prices were not raised, this indicates that the major price adjustments following the sharp inflation surge have now come to an end," the economist said.
However, in light of this year's tax increases, inflation is expected to accelerate, with Luminor forecasting an average annual inflation rate of 4–5 percent.
Statistics Estonia will publish the final data for the consumer price index for January on February 7 and the harmonized index on February 21.
The consumer price index (CPI) shows the change in the prices of consumer goods and services. It measures inflation as experienced by consumers in their day-to-day living expenses.
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Editor: Barbara Oja, Helen Wright