Estonian Inflation Slowest in Five Months on Strong Base

Estonian consumer-price growth was the slowest in five months in March, reduced by a strong comparison base a year earlier.

The inflation rate was 5.2 percent, compared with the same month last year, the least since October, the Tallinn-based statistics office said on its website today. The result compared with a 5.7 percent increase in the previous month and a 5 percent median forecast of four analysts surveyed by Bloomberg. In the month, prices rose 0.8 percent.

“The moderation in year-on-year inflation came largely on base effects, and price pressure remains significant still,” said Annika Lindblad, a Helsinki-based analyst with Nordea AB, in an e-mailed comment. The average price increase this year may exceed Nordea’s forecast of 3.9 percent, she said.

The Baltic country returned to price growth in March 2010 following 10 months of deflation due to the second-worst recession in the 27-member European Union. Annual inflation rose to 2.7 percent last year, while the country still qualified for euro entry when assessed by the European Commission last May for rolling 12-month price growth.

Inflation will exceed the central bank’s December forecast of 3.5 percent this year, it said in an e-mailed statement today. The bank will publish a new forecast in June.

Food, Fuel

Food and non-alcoholic beverage prices rose an annual 11.6 percent, which represented nearly half of the total increase in March, the office said. This compares with an increase of 13.2 percent in February. Fuel prices increased 14.2 percent, compared with a 13.1 percent increase the previous month.

Average annual inflation may rise to 4 percent this year and accelerate to 5 percent next year on higher utilization of resources as the economy recovers, SEB AB, the second-largest Baltic lender, forecast on March 23.

Inflation excluding food and energy prices should remain “subdued” this year, the International Monetary Fund said on March 3.

“Domestic price pressure from, for example, the labor market remains subdued due to the modest wage gains and still elevated unemployment rate, and thus inflation is seen moderating once the external factors pushing up prices abate,” Lindblad of Nordea said.

To contact the reporter on this story: Ott Ummelas in Tallinn at

To contact the editor responsible for this story: Willy Morris at

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