Flash estimate: Prices up 3.3% on year, down 0.2% from last month
According to a preliminary estimate by Statistics Estonia, the harmonized index of consumer prices fell by 0.2 percent in March compared with February, but increased by 3.3 percent compared with March last year.
"Although not all data has yet been received, it can be said that the March index was most affected by falling electricity and food prices, as well as rising fuel prices," said Lauri Veski, head of the consumer price statistics service at Statistics Estonia.
This is a flash estimate that also takes into account spending by tourists and will be specified further as additional data on March prices are received.
Statistics Estonia will publish the consumer price index data for March on April 7.
Analyst: Fuel price advance only the blossom, fruits yet to ripen
Raul Eamets, chief economist for Bigbank, noted that the rise in fuel prices as a driver of inflation is entirely logical.
"Anyone who has had to fill up their car since the start of the Iran war has felt it firsthand. Unfortunately, these are only the first signs of an increasingly inflationary environment," Eamets said.
Eamets explained that rising oil prices reach Estonian consumers through several channels.
"What happened at gas stations in March and will continue in the coming months is the most immediate effect. Next, the transport sector will begin to influence overall price increases, with all types of transport services becoming more expensive, from bus and plane tickets to freight. Rising transport costs will also affect the price of goods reaching consumers. Most of Europe relies on imported energy, meaning that as energy prices rise, higher costs will reach us through goods purchased from abroad as producers must somehow recoup increased electricity and heating expenses," the economist said. A third channel is agriculture and food production.
Eamets added that if fertilizers become more expensive due to rising natural gas prices, global food prices will also increase. As a small open economy, Estonia depends heavily on these, particularly as it imports more food than it exports.
"All of this means that current inflation forecasts should be thrown out the window," Eamets said.
The first indications of possible price increases this year are expected in the coming days when the Ministry of Finance releases its spring economic forecast.
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Editor: Mirjam Mäekivi, Marcus Turovski
