Cbank: Russian sanctions have little impact on Estonian consumer prices so far

Photo: Peeter Langovits.

The Russian import restrictions have made things harder for Estonian food producers and the impact of this has reached producer prices by now, yet it has had only a limited effect on consumer prices so far, the Bank of Estonia said in its comments on inflation data for October.

The purchase price of milk paid to farmers was 27 percent lower in October than a year ago, the purchase price of pork was down 8 percent over the year in September and the price of beef was down 15 percent. However, dairy products were 4.6 percent more expensive in October than a year earlier and meat products 1.4 percent cheaper, Rasmus Kattai, head of the economic policy and forecasting division at the central bank, said.

Just like in the preceding months, a big part of the decline in the price of the Estonian consumer basket came from lower energy prices, with electricity declining 7.6 percent and motor fuels 2.8 percent. The global oil price is down 20 percent from where it started the year, though the depreciation of the euro against the dollar means that the fall in euro terms has only been 14 percent.

The price of oil has mainly fallen because of reduced global demand as the outlook for economic growth in China and the euro area is weaker than was previously expected. Oil prices are also down because of higher output in the United States and because OPEC countries have been prepared to accept lower prices. Markets still believe that the price of oil is more likely to rise in 2015, and so the contribution that energy has made to reducing inflation will probably disappear in the future.

At 0.4 percent, Estonia's core inflation without energy and food was higher in October than in September. The prices of manufactured goods fell by 0.2 percent over the year, mainly because of lower prices for cars, while prices for services were up 1 percent. Service price inflation continues to be held back by falling prices for communications and the introduction of free higher education. These factors took 0.6 percentage points off the inflation for the consumer basket as a whole in October, Kattai observed.