CPI inflation edges up to 3.6% y/y in Estonia

CPI inflation edged up from 3.5% y/y in July to 3.6% y/y in August, according to figures of the statistical office, published on Friday. Prices of clothing and footwear put some upward pressure on the headline index as they increased by 0.2% y/y, due to the end of the season sales. In addition, recreation and entertainment prices, as well as miscellaneous goods and services also contributed.

On the other hand, some notable downward pressure was exerted by alcohol and tobacco products, where price growth decelerated from 8.5% y/y in July to 5.4% y/y in August as the effect of the excise tax hike introduced in July last year started to wear off. Growth of housing expenditure also eased down slightly to 6.8% y/y, down from record-high 7.8% y/y registered in the previous month, but still remained rather strong, mainly driven by higher electricity prices.

Looking forward, we expect that consumer price growth should ease somewhat in the near term, due to a base effect regarding prices of alcohol and tobacco products. On the other hand, however, we should note that PPI inflation continued to accelerate to 3.2% y/y in July, likely to translate into higher consumer prices.

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