The price growth of services is gradually slowing

Based on the data of Statistics Estonia, the cost of the Estonian CPI basket increased by 1% in April. Year-on-year, prices grew an average of 11.4%. The rapid inflation was sustained by the run-up in food and thermal energy prices.

The prices of all raw materials for food have undergone a significant rise year-on-year, keeping the inflation rate at a high level. However, compared to the beginning of the year, some rapidly appreciating goods (e.g., milk powder) have started to cheapen in the global market. The prices of dairy products are expected to somewhat decline in Estonia as well. According to Eesti Pank’s spring forecast, the food products price pressures deriving from the external environment should ease in the middle of the year.

As expected, the prices of thermal energy rose in several regions of Estonia in April, accounting for approximately a quarter of the price hike of the consumer basket. The price rise of thermal energy is induced by the continued run-up in fuel prices in the global market.

However, the April price rise indicator does not change the general annual inflation and is in compliance with Eesti Pank’s forecast - external pressures are still strong and domestic price rise factors are withdrawing slowly from the peak observed at the start of the year.

It should be mentioned that the price hike of services has started to slow at last and the low of the real estate cycle has started to manifest itself in the consumer basket as well. For example, rent prices have been cheapening for six months in a row.

Martin Lindpere, Eesti Pank, economist

Source: Eesti Pank

The BusinessmanTime.com / BTNews - Estonia