PPI inflation decelerates to 1.9% y/y in Estonia

PPI inflation decelerated from 2.1% y/y in April to 1.9% y/y in May, according to figures of the statistical office, published on Wednesday. The slowdown was rather broad-based. The utility sector contributed notably, as PPI inflation there eased down to 14.2% y/y, reaching its lowest level in the past four months, likely due to improving weather conditions. In addition, the manufacturing sector also played a part as PPI inflation edged down to 1.4% y/y. The deceleration was primarily driven by the manufacture of chemicals and chemical products. Moreover, the manufacture of food products and furniture also contributed.

PPI was more pronounced for production sold on the domestic market – up by 3.3% y/y, while export PPI came in at 2.3% y/y. As a result, we expect that CPI inflation could likely accelerate somewhat further in the near term. On the other hand, we should note that international oil prices have started to stabilize, which is likely to lead to some price growth stabilization. To remind, consumer price growth picked up to 3.0% y/y in May, predominantly due to international oil prices, which translated into higher fuel and transport prices at the domestic market.

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