- Inflation in Estonia slowed to 4.2% in February from the previous year, driven primarily by a 10.6% increase in housing costs due to higher electricity, heat energy, and fuel prices. - Alcohol and tobacco prices increased 2.2% month-over-month and 6.3% year-over-year, contributing to inflation. - Food price growth has slowed to 2.9% year-over-year, reducing its contribution to overall inflation from 55% the prior year to 16% in February. - Inflation is expected to continue slowing in coming months, with the forecast of average consumer price growth at 3.2% for the full year.

1. Flash comment: Estonia
Economic commentary by Economic Research Department March 7, 2012
Inflation in February driven by housing costs
Contributions to annual CPI growth, pp According to Statistics Estonia, consumer prices grew by 0.4% in
12 other
February compared to January. The annual growth, at the same
transport time, slowed to 4.2%.
10 housing
food
8 CPI
As expected, the biggest impact to annual price increase came
6 from housing costs which grew by 10.6% and contributed 40% to
4
the overall inflation. This was caused by growing energy product
prices, for example electricity was 13.7% and heat energy 16.7%
2 more expensive than a year ago. However, in monthly comparison
0 the change in housing costs was flat.
2008 2009 2010 2011 2012
-2
Another important contributor to inflation was alcohol and tobacco
-4
prices which were up by 2.2% in monthly and 6.3% in annual
comparison. This was affected by end of sales campaigns as well
Annual CPI growth as alcohol excise rate hike. In addition, growing fuel prices pushed
30% up transport costs by 0.6% mom and 4.9% yoy. Food price
growth, at the same time, has been slowing for months and
25%
reached 2.9% yoy in February (down from 13.2% registered in
20% February a year ago); as a result, its contribution to overall inflation
has fallen from 55% a year ago to 16%.
15%
10%
We expect price growth to continue to slow in coming months. Our
5% current forecast sees consumer price growth slowing to 3.2% on
average this year.
0%
2007 2008 2009 2010 2011 2012
-5%
regulated prices non-regulated prices
Annika Paabut
Inflation expectations, points
Chief Economist
80
+ 372 6 135 440
60 annika.paabut@swedbank.ee
40
20
0
2008 2009 2010 2011 2012
-20
-40
manufacturing
construction
-60 retail
services
-80 consumers
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