CPI inflation edges up to 3.8% y/y in Estonia

CPI inflation edged up to 3.8% y/y in October, after decelerating by 0.2pps m/m, according to data published by the stat office on Tuesday. The pickup was mostly driven by stronger increase of food prices, which reached 7.9% y/y, boosted by the unfavorable weather conditions in Estonia and the higher international food prices. Prices of alcohol and tobacco rose by 12.1% y/y, boosted by the increase of excise duties on alcohol and tobacco. Moreover, the growth of clothing prices quickened to 2.7% y/y, suggesting that there was some uptick in household consumption after it weakened somewhat in August and September. At the same time, the growth of hotel and restaurant prices eased, but remained tangible at 6.2% y/y partly due to the higher inflow of foreign residents in Estonia, which was boosted by the country’s EU presidency. There was also noticeable slowdown of housing price growth, which came in at 2.2% y/y, recording four-month low, likely affected by monthly decline of electricity prices.

As far as the monthly figures are concerned, CPI dropped by 0.2%, following 0.1% fall in September. Looking at the 12-month rolling figures, CPI inflation came in at 2.9% y/y. Looking ahead, we expect to see some easing of the CPI inflation in the coming months due to the higher base from Nov-Dec 2016. Still, the average CPI inflation for 2017 should come in slightly above 3%.

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