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Thursday, May 8, 2008

Estonia Inflation April 2008

Estonia's inflation rate rose to a 10-year high in April as food and housing costs jumped, showing Baltic countries may face spiraling inflation even as their economic expansion slows. Consumer prices rose an annual 11.4 percent, the most since April 1998, after a 10.9 percent increase in March, according to the statistics office in Tallinn.

In April 2008 compared to April of the previous year, the prices of goods changed by 10.4%, of which the prices of food by 15.3% and the prices of manufactured goods by 6.5%. The prices of services increased 13.4%. Regulated prices of goods and services changed by 21.4% and non-regulated prices by 8.7%. The index was mainly influenced by the price increase of food and by the increase in the expenditures on housing. The prices of motor fuel also increased, accompanied by the increase in the prices of transport services. Dairy-, cereal- and meat products gave more than two thirds of the price increase of food. The biggest impact on the increase of expenditures on housing had the price increase of heat energy.

On average, the prices of goods and services in April were 1.0% higher than in March.
The consumer price index was mainly influenced by the increase in the prices of food and heat energy. Fresh vegetables and cereal- and meat products gave 80% of the price increase of food.

If we weren't in a stagflationary scenario before, we certainly seem to be in one now . Today's data shows just how difficult it'll be for the authorities to bring inflation back down, despite a rapidly slowing economy.

The finance ministry has sais that it expects double-digit inflation to continue ``in the coming months,'' citing external pressures from rising global food and fuel prices.

Estonia's central bank last month forecast 2008 economic expansion of 2 percent, expecting a contraction at the end of the year, after lower spending and property investment pushed growth to 4.8 percent in the fourth quarter, the lowest in almost six years.

The central bank said today that April price increases were caused by rising prices of food, raw materials and heating charges in several regions due to higher global oil prices. Price increases are potentially in line with the central bank's forecast of 9.8 percent average inflation in 2008.

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