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Saturday, 20.04.2024, 13:27
Swedbank: wages increasing faster than prices in Estonia
"Food made the biggest contribution to the growth in consumer prices. Food prices were influenced by the increase in the prices of dairy and fish products and sugar. Food price growth impacts more strongly families with a lower income, where the share of food in the consumption basket is bigger. In the group of households with a lower income, approximately 40% of a family's budget is spent on food," Liis Elmik, senior economist at Swedbank, said in a press release.
Higher excise rates increased the prices of alcohol, tobacco and motor fuels. An increase in the price of crude oil also increased the price of motor fuels somewhat. In August the price of crude oil in euros was 4% higher than the year before. According to Swedbank's forecast, the price of an oil barrel will remain on the same level next year, at 52-53 dollars.
Price growth this year exceeds 3%. The prices are impacted by the increase in the price of raw materials and an increase in excise duties.
Despite the fast growth in income and the strong sense of security of the consumers, consumption growth has nevertheless decelerated. In the first seven months of this year, the sales of retail trade enterprises increased by 2% compared to the same period of the previous year.
Commenting on figures from Statistics Estonia indicating that prices in
August increased 0.4% compared to July and 3.9% compared to August 2016, the
Estonian Ministry of Finance said that inflation in the second half of the year
will remain fast due to tax measures.
"Inflation in the second half of this year will remain fast due to
additional tax measures and an increase in food prices. A slight deceleration
of inflation may be expected next year, as the impact of increased fuel prices
will disappear. In addition, the growth of food prices should also decelerate,
which this year was accelerated due to unfavorable weather conditions," Kristjan
Pungas, analyst at the Estonian Ministry of Finance's fiscal policy department,
said.
"While in the first half of this year inflation fluctuated around 3%,
then a notable acceleration took place in July-August. For the most part, the new
excise rates on low-alcohol beverages which entered into force in July were to
blame for that," Pungas said.
"Sellers stocked up on several months' worth of low excise alcohol,
but it was added to retail prices straight after the amendments entered into
force. Tax measures raise inflation in the amount of 1%, of which nearly a half
is made up of the increase in the excise rates on low-alcohol beverages."
Food prices on the global market are at the highest level they have been in
two and a half years. This is why the increase in food prices in Estonia is
also broad-based. Price growth of food products in August accelerated to 6.4%,
accounting for 1.5% of inflation in August. Consumer prices were also
influenced by the increase in electricity caused by the high exchange price of
electricity and the increase in rent prices before the new academic year.
The Estonian consumer price index was 0.4% higher in August than in July
2017 and 3.9% higher than in August 2016, the last time the annual inflation
was this high was in October 2012.