Estonia's inflation slowdown driven mainly by falling food prices
Estonia's inflation growth rate has been shrinking for a third consecutive month, driven largely by cheaper food prices, with annual inflation reaching just 1.5% in August — the lowest in the eurozone.
According to Estonia's Statistics Department, the country's inflation growth rate has been slowing for three months running, even as fuel and electricity prices keep rising. Lauri Veski, head of the department's consumer price division, says August of last year marked the peak of price growth, and inflation has been declining ever since. He notes that food and non-alcoholic beverages carry the greatest weight in the consumer basket, so slower price growth in this category is dragging down the overall consumer price index.
Bank of Estonia economist Lauri Matsulevits explains that this should not be read as falling prices overall — rather, prices rose so sharply last year that this year's year-on-year comparison naturally looks modest. August's price growth stood at 1.5%, the lowest figure in the eurozone, and Estonia has held that position for the whole summer. He attributes this mainly to a "high base" effect stemming from last year's tax hikes — a turnover tax increase and a motor vehicle tax introduced mid-year.
Cheaper dairy
Marta Palm, head of purchasing at the Rimi retail chain, confirms that prices for several major food categories are genuinely trending downward. This is most visible in dairy products, including butter: global butter prices peaked last year but have since fallen, letting shoppers buy it noticeably cheaper than a year ago. She adds that fresh products tend to respond to raw-material price shifts faster than long-shelf-life goods.
The numbers
Statistics Department data show the consumer price index rose 0.4% in August compared with July, and 1.5% year-on-year — goods were up 0.9%, services up 2.4%. Prices last grew this slowly in spring 2021. Among housing costs, waste collection fees rose the most, by nearly 54%, while firewood rose 10% and electricity nearly 4%. Compared with July, petrol rose 2.3%, diesel 11.2%, and electricity 3.1%. Food prices, by contrast, fell 0.4% over the month, with coffee, citrus and other fresh fruit prices declining.
