Electricity price decrease affects industries

According to Statistics Estonia, in February 2014, the producer price index of industrial output changed by -0.4% compared to January 2014 and by –0.9 % compared to February 2013.

In February, compared to the previous month, the producer price index was more than average influenced by the decrease in prices in electricity, gas, steam and air conditioning supply and in the manufacture of building materials as well as by the increase in prices in the manufacture of wood products.

Compared to February 2013, the producer price index was more than average influenced by the decrease in prices in electricity, gas, steam and air conditioning supply, in the manufacture of electronic equipment and in mining as well as by the increase in prices in the manufacture of wood products .

Change in the producer price index of industrial output by economic activity, February 2014
Economic activity according to EMTAK 2008 February 2014 – January 2014, % February 2014 – February 2013, %
TOTAL -0.4 -0.9
Manufacturing 0.4 0.2
Mining 2.7 -11.4
Electricity, gas, steam and air conditioning supply -9.3 -6.9
Water supply; sewerage; waste management and remediation activities 0.0 1.0

In February 2014, the export price index changed by 0.3% compared to January 2014 and by –2.3% compared to February 2013.

In February, compared to the previous month, the prices of oil products, timber and wood products increased more than average and the prices of electricity, building materials and food products decreased more than average.

In February 2014, the import price index changed by -0.6% compared to January 2014 and by –2.7% compared to February 2013.

In February, compared to the previous month, the prices of electricity, wearing apparel and electronic equipment decreased more than average and the prices of building materials, wood and wood products increased more than average.

Source: Statistics Estonia

Russia could nationalize Estonian assets

 

Estonian economist Maris Lauri writes that EU and US are likely to impose extensive trade sanctions in Russia in the light of Ukraine events. Russia is likely to respond with its own means which may include that the assets of foreign companies in Russia could be nationalized.

Lauri says that although such retaliation would be mainly targeted against US and British enterprises, one should not forget that Russia likes to attack weaker ones which means that this is something that also Estonian entrepreneurs must be prepared for.

Since Estonia is fully dependent on supplies of Russian natural gas, the Estonian government must quickly look at alternative possibilities to reduce Estonia’s energy dependency on Russia.

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Lowest inflation in four years

Data from Statistics Estonia show that inflation in Estonia slowed in February to 0.6%. Inflation has been falling steadily since last summer and the last time inflation was below one percent was four years ago. Consumer prices were 0.1% higher in February than in January. Preliminary assessments show that inflation in the euro area stood at 0.8%* in February, the same as in the preceding two months. Although there was no change in inflation in the euro area in February, prices of manufactured goods rose faster, though this was offset by a simultaneous fall in energy prices.

The fall in energy prices was the main factor behind the fall in inflation in Estonia. Motor fuels were 4.6% cheaper in February than a year earlier, while heat energy was 4.7% cheaper. The price of district heating was affected by the lower price of gas, which is linked to changes in the oil price over the past three quarters. The strengthening of the euro has also had a strong impact on the fall in energy prices. However, the factors that have driven the fall in energy prices have probably by now been exhausted.

The sharp rise in electricity prices of 29% in 2013 was replaced by falls of 1.3% in January and 4.1% in February. The price on the electricity exchange fell in February to its lowest level for a year and a half as electricity consumption was lower than usual because the weather was warm. The electricity price was also brought down by the energisation of EstLink 2, which increased the transmission capacity between Estonia and the Nordic countries and led to stiffer competition in the local electricity market.

Food products, which includes alcohol and tobacco, were 2.8% higher in price in February than a year earlier. Food prices have exited their slump on world markets and the price of milk for example has been rising for a long time, while prices of coffee, sugar and cocoa rose sharply in February. The impact of these price rises is steadily passing through to Estonian consumers.

Core inflation, with food and energy prices removed, stood at 0.8% in February. Without the effect of lower prices for communications, inflation in service prices would have been 3.4%. The slowdown in prices of imports meant that inflation in prices of manufactured goods also slowed, falling to 0.4% in February. Prices for goods sold in Estonia are highly dependent on what happens in foreign markets as imports account for around 40% of household consumption, but the higher inflation rate for manufactured goods in the euro area was not reflected in Estonian prices.

Eesti Pank’s forecast expects consumer price inflation in Estonia to be 2.1% in 2014. Inflation will remain low in the coming months, partly because of the high comparison base from last year, but it is forecast to pick up in the second half of the year.

The primary role of the central banks of the euro area is to maintain inflation in the euro area at below but close to two percent over the medium term. The fact that Estonia’s inflation is slightly higher than the euro area average is to be expected and is a consequence of faster economic growth and harmonisation of relative incomes with those of the euro area.

* Calculation based on the harmonised index of consumer prices.

Source: Bank  of Estonia

Author: Rasmus Kattai, Head of the Economic Policy and Forecasting Division, Eesti Pank

Eesti Energia ditches plant expansion for shale oil

State-owned energy giant Eesti Energia’s board will cancel plans to build a second boiler unit for a Narva power plant today.

The company’s CEO, Sandor Liive, told Postimees today that they will not go forward with the 640-million euro plan of adding a second block, which would double the capacity of the Auvere plant to 600 megawatts.

Liive said they will concentrate on more lucrative shale oil production, which also produces electricity as a byproduct, and the company hopes to increase shale oil production by 10-fold by 2025, with Liive adding that producing shale oil doubles the amount of energy extracted from oil shale rock, compared to producing only electricity.

Source: Estonian Review / ERR

Inflation slowed as energy prices fell

Inflation in Estonia continued to slow in January, declining to 1.1% according to data from Statistics Estonia, while prices were 0.4% higher than in December. Preliminary assessments show that average annual inflation in the euro area slowed in January from 0.8% to 0.7%*.

The causes of the slowdown in inflation in Estonia were similar to those in the other countries of the euro area. The lower rate of inflation was mainly a consequence of lower prices for energy, notably a fall of 3.1% in prices for motor fuels and of 1.5% in the price of district heating. The slowdown in inflation in Estonia was to a large extent a reflection of the sharp rise in electricity prices a year ago passing out of the comparison base, with the result that the price of energy consumed fell. This is why inflation fell despite the faster rise in the prices for the rest of the consumer basket. In recent months falling prices have been seen over a slightly broader base in Estonia as 15 other groups of goods and services alongside energy saw lower prices in January, affecting around one third of the consumer basket in total. Among these were several manufactured products and food products.

Food products as a whole were 3.2% more expensive in January than a year earlier. Price growth was maintained by a seasonal rise in the prices of fruit and vegetables and by an increase in alcohol excise. The rise in tobacco excise will most likely be passed into consumer prices during the next three months because of stocks in warehouses, as happened last year. Prices for food commodities fell on world markets in January, with rises in only some product groups, notably dairy and meat products.

Core inflation in Estonia without energy and food accelerated to 0.8% in January from 0.4% in December. Core inflation was mainly pushed up by price rises of 4% for services other than communications. With communications included, services inflation was 1.2% in January. Factors holding down core inflation other than the fall in communication prices were weak economic activity in Estonia’s neighbours and a strengthening of the euro over the year. However core inflation rose by an estimated 0.3 percentage points as the effect of free public transport in Tallinn passed out of the calculation. The slowing of inflation in clothing and footwear prices since autumn was noteworthy among prices of manufactured goods.

Eesti Pank’s forecast expects consumer price inflation in Estonia to be 2.1% in 2014.


The primary role of the central banks of the euro area is to maintain inflation in the euro area at below but close to two percent over the medium term. The fact that Estonia’s inflation is slightly higher than the euro area average is to be expected and is a consequence of faster economic growth and harmonisation of relative incomes with those of the euro area.

* Calculation based on the harmonised index of consumer prices.

Source: Bank of Estonia

Author: Rasmus Kattai, Head of the Economic Policy and Forecasting Division, Eesti Pank

Eesti Energia under pressure to cut investments

Because of its massive dependence on oil shale energy, Estonian state power company will find it harder to raise capital in the near future because rating agency Moody’s this week lowered the company’s credit rating, writes Eesti Päevaleht.

Moody’s said that in the light of the EU climate policy, Eesti Energia is investing in producing energy and shale oil from oil shale that is a considerable risk.

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Electricity price hike makes life in Estonia expensive

According to Statistics Estonia, the consumer price index increased 2.8% in 2013 compared to the average of 2012.

The annual change of the consumer price index was mainly influenced by the 28.7% price increase of electricity that arrived at homes, which accounted for two thirds of the total increase. The 4.9% price increase of food and the 3.5% price decrease of transport also had a bigger impact on the index. Motor fuel was 3.7% cheaper than in 2012.

In 2013, of food products, the prices of potatoes (39%) and fresh vegetables (16%) increased the most and the prices of coffee and sugar (11%) decreased the most, compared to the average of 2012.

In the last fifteen years, the annual change of the consumer price index has been under 3% on two occasions: –0.1% in 2009 and 1.3% in 2003. A 3% annual change was recorded in 2010 and 2004.Change of the consumer price index by commodity groups, 2013

Commodity group 2012–2013, %
TOTAL 2.8
Food and non-alcoholic beverages 4.1
Alcoholic beverages and tobacco 5.1
Clothing and footwear 4.3
Housing 8.8
Household goods 1.0
Health 6.0
Transport -3.5
Communications -9.8
Recreation and culture 1.9
Education -3.2
Hotels, cafés and restaurants 6.5
Miscellaneous goods and services 2.0

December inflation was mainly influenced by electricity

According to Statistics Estonia, the change of the consumer price index in December 2013 was –0.1% compared to November 2013 and 1.4% compared to December of the previous year.

Goods were 1.1% and services 1.9% more expensive compared to December 2012.

Regulated prices of goods and services have decreased by 0.7% and non-regulated prices have risen by 2.1% compared to December of the previous year.

Compared to December 2012, the consumer price index was influenced the most by the 21.9% price increase of electricity that arrived at homes, which accounted for 60% of the total increase. Two thirds of the increase in the index caused by electricity were cancelled out by the decreasing prices of communication services, which were in decline all year. The 2.2% price increase of food was cancelled out by the 2.8% price decrease of transport. In December 2013, motor fuel was 1.8% cheaper than in the same month in 2012. Compared to December 2012, of food products, the prices of fish have increased the most (15%) and the prices of coffee, eggs and sugar have decreased the most (17%, 15% and 15%, respectively).

In December compared to November, the consumer price index was mainly influenced by the 3.9% price decrease of electricity that arrived at homes. The plane tickets bought for December were 27% more expensive than in November. Motor fuel was 1.6% more expensive than in November. The sales of alcoholic beverages and the 6.9% price increase of other fruits also had a bigger impact on the index. Compared to November, of food products, the prices of fresh cucumber (23%) and bananas (21%) increased the most and the prices of Chinese cabbage (14%) and rape seed oil (10%) decreased the most.

Read more from Statistics Estonia

Nation’s largest wind turbine nearing completion

A 120 meter tall wind turbine, with blades reaching 116 meters in diameter, is nearing completion on Saaremaa, and could power half the island next summer.

The 85-ton rotor and blades were lifted in place in one piece on Tuesday, and owners expect it to begin producing electricity at the end of January, ETV reported.

Head of AS Eleon, which will operate the turbine, Oleg Sõnajalg said that the technological solutions behind the project where developed in Estonia. Sõnajalg added that the rotor is the largest in the Baltics and Scandinavia.

He said that, along with six smaller turbines on the island’s Sõrve peninsula, the turbines could power the entire island in summer, if wind conditions are agreeable, with the new turbine generating the same amount of power as the other six combined.

Source: ERR via Estonian Review

Estonia helps Ireland to get rid of its municipal waste

Ireland has shipped 2,500 tons of its municipal waste to Estonia that will be burned in Iru waste incineration plant that belongs to state-owned Eesti Energia, writes Eesti Päevaleht daily.

At present the garbage is temporarily stored in Tallinn landfill because the Iru waste-to-energy plant is undergoing regular maintenance.

Read more from BBN

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