When issuing a monthly estimate of price increases, Statistics Estonia also assesses store prices as one component. The agency's 13 price collectors visit stores each month, recording the prices of selected goods. These prices, multiplied by corresponding weights, form part of the monthly price change calculation.

In the future, Statistics Estonia is considering changing its approach. Lauri Veski, head of the agency's consumer price statistics team, said they have begun cooperating with four retail chains to test how using more detailed sales data directly from stores could work in data collection.

Veski declined to name the four chains but noted that they sell more than half of the food and beverages in Estonia. The agency is also attempting to involve other retailers in the collaboration.

Retailers provide Statistics Estonia with information on how much of a product linked to a specific barcode was sold and the total revenue generated. In other words, the agency would have access to the final average price of goods sold, factoring in discounts and other adjustments. Another clear advantage would be a significant increase in the sample size.

Although the data is already flowing to Statistics Estonia, the agency is still analyzing how and to what extent it can be used in calculating inflation. It aims to reach conclusions by the fall about whether and in what form to change its current data collection methods and how to incorporate store-provided data into inflation calculations.

Using store data does not mean that all price collectors would immediately lose their jobs. They would continue to record monthly prices for everything other than food, tobacco and beverages.

Statistics Estonia is also considering implementing a similar system for other types of goods in the future.

Currently, the agency does not account for e-commerce in its inflation calculations. Changes in prices on platforms such as Amazon or Chinese online stores are not factored in, regardless of how large a share online purchases take in people's shopping baskets.

According to Veski, Statistics Estonia believes that e-commerce should be incorporated into price change calculations going forward.

"Since Estonians increasingly order goods from abroad through these channels, we will inevitably have to address this issue," Veski said.

Electricity

Statistics Estonia is also analyzing another methodological change, this time related to the price of electricity. During the energy crisis, when prices rose rapidly, the agency overestimated the contribution of electricity prices to the overall calculated price increase — something Statistics Estonia acknowledges.

Although more than half of electricity consumers purchase electricity at a fixed rate, meaning the price does not change month to month, Statistics Estonia used new data every month. This data was partly based on the exchange price and partly on the prices offered by electricity sellers for fixed-rate packages.

Effectively, when the rise in exchange prices also drove up the prices of new fixed-rate contracts, all of these increases were factored into the inflation calculation. Over a longer period, this does not have a major impact, but in times of rapid price growth, it temporarily accelerates inflation.

Veski said electricity sellers have now started providing Statistics Estonia with direct monthly data on the quantity of electricity sold and the prices at which it was actually sold. In the future, this would allow the agency to assess real-time changes in electricity prices more accurately.

Statistics Estonia plans to decide this summer whether and in what form to change its methodology.

"Then we can make decisions about whether and when to implement the new methodology," Veski said.

However, even if Statistics Estonia decides to change its methodology, it would not mean that past inflation figures would be recalculated. Although the agency is compiling an alternative time series dating back to 2020, changing official statistics retroactively would require stronger justification.

"When the Netherlands and Finland made corrections to their electricity indexes in 2023, they did not revise their historical time series," Veski noted.

Moreover, if past inflation was now recalculated downward, it would mean that future inflation rates would be somewhat higher. If it is decided that prices fell less at a certain point in the past, it would follow that they had to rise more at a subsequent point.

Car registration fee

According to the Ministry of Finance, the introduction of a car tax is expected to add 1.2 percentage points to this year's price growth. Veski does not fully agree, but stops short of calling the estimate incorrect. Statistics Estonia used the prices of popular car models in Estonia to calculate the projected impact on prices.

Veski acknowledged that during periods of rapid change, such as when new taxes are introduced, the methodology can sometimes produce results that briefly diverge from reality. However, he added that over the longer term, these effects tend to even out.

Any possible overestimations could be offset by the fact that Statistics Estonia does not factor in the registration fee obligation for used car sales.

In Estonia, a registration fee must be paid once for each car at the time of transfer of ownership. This means that all vehicles already circulating in Estonia became subject to a new tax obligation when sold.

Because it is complicated for Statistics Estonia to account for the registration fee in its calculations, it is not included. As a result, although the prices of used cars are reflected in the statistics, the registration fee itself is not captured in the inflation figures.

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