The Bank of Estonia said earlier this week that Estonia showed the fastest general price growth in food in the eurozone. Food prices increased by 6.1 percent in June, while the price increase in the eurozone was just 1.4 percent.
"Estonia stands out among the countries in the eurozone with a general increase in food prices,” Bank of Estonia economist Sulev Pert said in a press release.
Pert added that the price growth in the eurozone had been hindered by external factors, first and foremost by a decrease in oil prices, the low price level of which was also why they expected inflation in Estonia to remain at around 3 percent.
"Food prices in June increased by 6.1 percent year on year in Estonia, and 1.4 percent year on year in the eurozone. The price of dairy products and fruit increased by more than 10 percent year on year in Estonia, while the price rate of vegetables and fish products has decreased in the last few months," Pert said.
Approximately half of Estonian inflation depended on import prices, while the other half depended on internal factors, Pert said. Both the price of oil industrial raw materials had decreased moderately on the world market in the last few months. But the price rate of food products had not changed much. External factors, first and foremost the price of oil, had kept prices from decreasing, Pert said.
He added that internal factors, first and foremost an increase in wages and employment, but also the conditions of the financing of loans had been favorable to consumption growth. Despite this, the growth in the volume of retail sales had been moderate in the past few months, the sales of cars excluded.
"The inflation of industrial goods declined in June partly due to seasonal factors, while core inflation is led by an increase in the price of services. Service price growth in June was fast, reaching 2.8 percent. A decrease in the price of two big and significant groups of services, communications services and the price of holiday deals, has balanced out the impact of all other price growth. Without those, the price of services increased already more than 4 percent in June. Approximately a third of the inflation this year is due to an increase in taxes," he said.
"Inflation in the eurozone decelerated to 1.3 percent in June due to a decrease in energy prices, but core inflation also stayed low despite an increase in economic activity. Most recent figures and survey results said that the fast economic growth in the eurozone will continue, which should also start to transfer more strongly into price growth. The aim of the price stability of the European Central Bank is that inflation in the eurozone accelerate towards 2 percent but remain slightly below it," Pert said.
Editor: Dario Cavegn