Swedbank: Inflation accelerated in Estonia

  • SwedbankInflation picked up from 3.6% in May to 3.8% in June.
  • Motor fuels and electricity contributed the most.
  • In 2021, consumer prices are expected to grow by 2.6%, around the same as before the crisis.

Price pressures have increased in Estonia. In June, inflation accelerated from 3.6% in May to 3.8% in June. In the second half of this year, annual inflation should remain above 3%. In 2021, consumer prices are expected to grow by 2.6%, around the same as before the crisis.

In June, the consumer price index was lifted by motor fuels and electricity. The prices of motor fuels rose by a fifth as global oil prices increased. The price of electricity rose by a third as production costs have risen, including CO2 quota prices. Also, maintenance work of underwater cables reduced electricity supply in the region, pushing electricity prices even higher. The price of electricity at the electricity exchange in Estonia was the highest ever in June, around 2 times higher than in June last year.

Also, rental prices of apartments have started to increase again, going up by 6.8% in June, in a year. Demand for rental apartments has strengthened, although the number of apartments to rent is still substantially higher than during the same time in 2019, before the crisis.

Strong domestic demand has made it easier to lift prices. The prices of entertainment and hobbies have increased, too, especially for sports and hiking gear. The prices of clothing and footwear have also risen as people have started to go out again. Google mobility data show that people movement in entertainment and shopping areas was much higher than last June. Retail sales were super strong in May, up by 17.7% from May 2020 and 19,5% from May 2019.

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