Construction price still decreasing

According to Statistics Estonia, the percentage change of the construction price index was -3.4% in the 2nd quarter of 2010 compared to the 2nd quarter of the previous year. This index decreased for the sixth quarter in succession, though the decrease has slowed down.

The construction price index started to decrease at the beginning of 2009 compared to the same quarter of the previous year and the largest decrease was reported in the 3rd quarter (-10.5%). After that, the decrease has decelerated quarter by quarter — in the 4th quarter the decrease was 10% and in the 1st quarter of 2010 it was 7.5%.

In the second quarter of 2010, the construction price index was mainly influenced by the 6.4% decrease in labour costs. The prices of building machines have decreased the least compared to the same period of the previous year. Of building materials, the index was mainly influenced by the fall in the prices of insulations products and finishing materials.

Compared to the 1st quarter of 2010, the change in the construction price index was -0.1%, mainly influenced by the decrease in labour costs. The repair and reconstruction work price index also fell by 0.1% compared to the 1st quarter of 2010, and by 3.5% compared to the 2nd quarter of the previous year.

The calculation of the construction price index covers four groups of buildings — detached houses, blocks of flats, industrial buildings and office buildings as well as office buildings covered by the repair and reconstruction work price index. The index expresses the change in the expenditures on construction taking into consideration the price changes of basic inputs (labour force, building materials and building machines).

Change in the construction price index, 2nd quarter 2010
  1st quarter 2010 –
2nd quarter 2010, %
2nd quarter 2009 –
2nd quarter 2010, %
TOTAL -0.1 -3.4
labour force -0.4 -6.4
building machines -0.1 -1.4
building materials 0.0 -2.3
Index of detached houses 0.0 -2.7
Index of blocks of flats -0.1 -3.4
Index of industrial buildings -0.1 -3.3
Index of office buildings -0.1 -3.6

 

Change in the repair and reconstruction work price index, 2nd quarter 2010
  1st quarter 2010 –
2nd quarter 2010, %
2nd quarter 2009 –
2nd quarter 2010, %
TOTAL -0.1 -3.5
labour force -0.2 -5.9
building machines -0.2 -0.5
building materials 0.0 -2.7

 Source: Statistics Estonia

Prices increased in wood production

According to Statistics Estonia, in June 2010 the producer price index decreased by 0.1% compared to May and increased by 3.9% compared to June of the previous year.

In June compared to the previous month, the producer price index was more than average influenced by the decrease in prices in the manufacture of chemicals and chemical products as well as by the increase in prices in the production of wood and wood products. Compared to June 2009, prices increased the most in the production of wood and wood products and in the production of metal products.

Change in the producer price index by economic activity, June 2010
Economic activity May 2010 –
June 2010, %
June 2009 –
June 2010, %
TOTAL -0.1 3.9
Energy supply 0.0 4.2
Mining 0.0 -0.4
Manufacturing -0.1 4.1

In June 2010 the export price index decreased by 0.5% compared to May 2010 and increased by 6.6% compared to June of the previous year.

In June compared to the previous month, the export price index was more than average influenced by the decrease in prices in the manufacture of metals and in the extraction of peat as well as by the increase in prices in the manufacture of rubber and plastic products and in the manufacture of wood products.

In June 2010 the import price index decreased by 0.6% compared to May 2010 and increased by 9.5% compared to June of the previous year.

In June compared to the previous month, the import price index was more than average influenced by the decrease in the prices of mineral fuels and by the increase in the prices of agricultural products and electrical machinery and equipment.

Source: Statistics Estonia

Fitch Ratings upgraded Estonia’s sovereign rating

On Monday, July 19, Fitch Ratings upgraded Estonia’s sovereign rating by two levels to A;  Stable Outlook was assigned.

Märten Ross, Deputy Governor of Eesti Pank, says that the rating agency’s decision reflects in particular a change in the risk assessment of Estonia’s economy due to becoming a member of the euro area. “According to the agency, Estonia’s sound public finances and flexible economy make the country well-suited for a currency union. Estonia should hereafter aim at maintaining these strengths and guaranteeing the sustainability of public finances in the context of improved conditions that the currency union provides,” added Ross.

In its decision Fitch commented that joining the euro area improves Estonia’s risk profile as it reduces risks associated with external debt and FX lending. Furthermore, becoming a member of the euro area gives Estonia’s banks access to ECB liquidity facilities.

Fitch considers that a difficult but necessary internal adjustment will continue in the Estonian economy over the medium term. The agency expects an export-led recovery over the medium term.

The last rating decision by Fitch Ratings was given on March 30 with the Rating Watch Positive. Monday’s decision removed the rating from the Watch List.

On June 10, Standard & Poor’s upgraded Estonia’s sovereign rating to A with a Stable Outlook.

On March 31, Moody’s lifted Estonia’s rating outlook to Stable from Negative and affirmed the country’s rating at A1.

Fitch Ratings’ press release is available on the website of Eesti Pank.

Source: Bank of Estonia

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