Flash comment: Estonia - April 9, 2012


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Flash comment: Estonia - April 9, 2012: Price growth in March above expectations

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Flash comment: Estonia - April 9, 2012

  1. 1. Flash comment: Estonia Economic commentary by Economic Research Department 9 April 2012 Price growth in March above expectations Consumer price growth According to the data published by Statistics Estonia, the consumer 10% 2.5% prices grew by 1% in March compared to the previous month with the annual inflation accelerating to 4.4% (from 4.2% in February). 8% 2.0% These price increases exceeded our expectations, mostly on the 6% 1.5% account of higher alcohol and tobacco as well as food prices 4% 1.0% (+2.9% and +1% mom, respectively). Tobacco prices were affected 2% 0.5% by the new production with higher excise rates (raised in January), and food prices mostly by stronger than expected impact by 0% 0.0% seasonal factors. 2009 2010 2011 2012 -2% -0.5% The main contributor to growth was, as expected, the continuously -4% -1.0% rising housing costs (11% yoy), making up more than 40% of the Monthly grow th (rs) Goods Annual grow th Services annual price increase. This was affected by rising global energy prices as well as colder than usual weather in March. Rising oil prices and more expensive plane tickets pushed up transport costs, Contributions to CPI growth, pp by 1.9% mom and 5% yoy. 12 other transport 10 housing food 8 CPI Outlook 6 Housing costs will continue to be the main contributor to the overall price growth throughout the first half of this year; during the second 4 half, however, the comparison base will start to change, thus 2 decelerating the growth of housing costs. We also expect food price growth to slow, affected by more favourable global trends. 0 -2 2008 2009 2010 2011 2012 In January, we forecasted the average price growth this year to be 3.2% but in light of the price increases seen during the first months, -4 this seems to be too low; we are currently in the process of revising our forecasts. Oil price movements will remain one of the biggest Inflation expectations, pts risks to inflation outlook. 80 Higher price growth can in turn dampen private consumption as 60 growing prices of necessities force households to consider more their purchases, thus making them more price sensitive. Weaker 40 demand, on the other hand, limits further consumer price growth. 20 0 2009 2010 2011 2012 -20 -40 industry construction Annika Paabut -60 retail Chief Economist services -80 consumers + 372 6 135 440 annika.paabut@swedbank.eeSwedbank Economic Research Department Flash comment is published as a service to our customers. We believe that we have used reliable sources and methods in the preparation of the analyses reported in this publication.SE-105 34 Stockholm, Sweden However, we cannot guarantee the accuracy or completeness of the report and cannot beek.sekr@swedbank.com held responsible for any error or omission in the underlying material or its use. Readers arewww.swedbank.com encouraged to base any (investment) decisions on other material as well. Neither Swedbank nor its employees may be held responsible for losses or damages, direct orLegally responsible publisher indirect, owing to any errors or omissions in Flash comment.Cecilia Hermansson, +46 8 5859 7720