In June, consumer prices rose by 21.9% year-on-year and by 2.7% month-on-month. The price increase accelerated again in annual and monthly terms. Energy accounted for around 60% of the total increase in prices. The price of electricity has doubled, and the price of gas has tripled in a year. Energy prices will remain high as demand outstrips supply and political tensions reduce gas supplies from Russia.
The price of food has increased by a fifth in a year. The prices of many food items have risen rapidly. Despite the increase in competition among grocery stores with the entrance of Lidl, food prices in Estonia have risen much more than elsewhere in Europe. One of the reasons for this might be high energy and personnel costs, which have grown more than elsewhere in Europe. In addition, the Estonian market is small and does not allow to produce large quantities at a cheaper unit price.
In the second quarter, prices rose by 20 percent, while the average net salary of Swedbank’s customers rose by 12 percent. The dramatic decrease in purchasing power has started to affect consumption. The volume of retail sales increased by only 2 percent year-on-year in May. The sales volumes of grocery stores even decreased.
The very rapid price increase will continue in the coming months The price increases should slow down towards the end of the year. This is primarily due to technical reasons because the price of energy started to rise in the autumn of last year.
