Goods have become 1.5 pct and services 4.9 pct more expensive

According to Statistics Estonia, in January 2019 compared to December 2018, the change of the consumer price index was –0.2% and compared to January of the previous year, 2.7%.

Goods were 1.5% and services 4.9% more expensive compared to January 2018. Regulated prices of goods and services have risen by 4.0% and non-regulated prices by 2.3% compared to January of the previous year.

Compared to January 2018, the consumer price index was affected the most by housing, which contributed nearly half of the total increase. Of the latter, half was contributed by 18.1% more expensive electricity that reached homes and one-sixth by 19.8% more expensive solid fuels. Motor fuels were cheaper in January 2019 compared to January 2018. Petrol was 5.4% and diesel fuel 3.5% less expensive than a year ago. The biggest year-on-year price increases among food products were seen for fresh vegetables (27%), potatoes (25%) and ready-made meals (14%), and the biggest price decreases were seen for sugar (20%), fresh fruit (11%) and eggs (11%).

Due to continuously changing consumption pattern of the population and prices, Statistics Estonia updates the weights system of the consumer price index and the representative goods every year.

In 2019, the weights system of the consumer price index corresponds to the average expenditure structure of the population in 2018. The base prices used for calculations are December prices of the year 2018. To ensure comparability with previous periods, the consumer price index is continued to be published on the base 1997 = 100. The linking month is December 2018.

Change of the consumer price index by commodity groups, January 2019
Commodity group Weight 2018, ‰ Weight 2019, ‰ December 2018 – January 2019, % January 2018 – January 2019, %
TOTAL 1000.0 1000.0 -0.2 2.7
Food and non-alcoholic beverages 227.4 217.9 0.8 1.7
Alcoholic beverages and tobacco 66.2 61.0 0.8 5.1
Clothing and footwear 55.8 54.6 -4.8 2.6
Housing 139.7 140.6 1.3 8.8
Household goods 62.4 62.0 0.9 2.1
Health 54.0 55.0 0.2 2.7
Transport 146.2 151.7 -2.7 -2.8
Communications 44.1 47.9 -0.4 -4.8
Recreation and culture 89.1 92.5 -0.8 5.3
Education 11.6 10.8 2.4 7.2
Hotels, cafés and restaurants 47.2 48.3 0.3 4.6
Miscellaneous goods and services 56.3 57.7 0.5 3.7

Statistics Estonia publishes the consumer price index on the fifth working day of each month, after the end of the reporting period. For the statistical activity “Consumer price index”, the main representative of public interest is the Ministry of Finance, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Estonian GDP at current prices was 26 bEUR in 2018

According to Statistics Estonia, in 2018, the gross domestic product (GDP) of Estonia increased 3.9% compared to 2017. For the third consecutive year the economic growth in Estonia was faster than 3%. In the 4th quarter of 2018, the Estonian economy increased by 4.2% compared to the 4th quarter of 2017.

2018

In 2018, the GDP at current prices was 26 billion euros.

Main contributors to a growth covering the majority of economic activities were construction, manufacturing, professional, scientific and technical activities. A significant contribution to growth came also from transportation and storage, information and communication. All the above-mentioned economic activities showed good results in 2018. The only significant negative impacts on the economic growth were exerted by agriculture, forestry and fishing. This was largely due to their poor performance in the second half of the year.

The value added in construction increased 18.6% in 2018. Last time the growth in construction was that fast was in 2011 when the economy just began to recover from the crisis. Other activities with fast value added growth were professional, scientific and technical activities (13.3%), information and communication (10.6%), transportation and storage (9.2%) and mining and quarrying (8.7%). The growth of value added in manufacturing, which contributes the largest share in the GDP, accelerated to 5.3% in 2018. The value added in trade increased only 0.9%.

Net taxes on products did not increase in 2017, while in 2018 their growth recovered. The net taxes on products at current prices increased by 6.9% and by 2.2% adjusted for inflation.

In 2018, the exports of goods and services increased 4.3%, mainly due to the growth of the services exports. Although the growth was slightly lower than in 2017, the export of services increased by 5.6%. This was mostly due to the exports of computer and transportation services. The export of goods increased 3.6%. Main contributors to that growth were the exports of computers, electronic and optical equipment, motor vehicles, trailers and semi-trailers. Imports of goods and services increased 6.1%, which was the fastest growth in the last 6 years. This was mostly influenced by the imports of machinery and equipment not elsewhere classified, basic and pharmaceutical products and pharmaceutical preparations. The imports of services increased 11.6%, thanks to the imports of travel and transportation services. Net exports reached 904 million euros in 2018, which is 3.5% of the GDP.

Domestic demand also produced the best results in the last 6 years, growing 5.3%. This was mostly due to final consumption of households, which increased 4.6% in 2018. Last time the household consumption grew that fast was at the peak of the previous boom in 2007. Investments that declined in the first half of the year started to grow again in the second half. The investments increased 3.3% in 2018, which is a very good result compared to previous years. Biggest contributions to growth came from investments into buildings and structures by nonfinancial enterprises and from investments into dwellings by households. The investments by nonfinancial enterprises and government sector into transport equipment declined. The final consumption expenditure of the government sector grew by 0.3 in 2018.

In 2018, the growth of the GDP once again surpassed the growth of the number of persons employed. As a result, the productivity per person employed grew by 2.6%. The number of hours worked decreased in 2018, causing a productivity growth of 5.3% per hour worked. As the pressure on wages continued in 2018, the unit labour cost also increased rapidly and at 6% surpassed the growth of productivity per hour worked.

Read more from Statistics Estonia

Per capita GDP of counties becoming more even

According to Statistics Estonia, 64% of the gross value added of the Estonian gross domestic product (GDP) in 2017 was created in Harju county. However, the differences between counties as regards GDP per capita are getting smaller.

In 2017, Estonia’s GDP reached 24 billion euros at current prices. Harju county’s contribution amounted to 15 billion euros, 13 billion euros of which came from Tallinn. Harju county was followed by Tartu county and Ida-Viru county, the shares of which in Estonia’s GDP stood at 11% and 6%, respectively. Hiiu and Põlva counties had the smallest shares in 2017 – both contributed less than 1% to the Estonian GDP.

Over 70% of the gross value added of Estonia was created in the service sector in 2017. The influence of the cities of Tallinn and Tartu, in particular, resulted in Harju county and Tartu county having the largest share of services – 76% and 70%, respectively. Contrary to the previous trend, the share of the service sector in value added declined slightly in all counties except in Lääne county. Most notable drops in the share of the sector took place in Põlva, Järva and Jõgeva counties.

Industry and construction accounted for 28% of the gross value added of Estonia in 2017. As the share of the service sector has declined, the share of industry and construction in the value added of multiple counties has increased slightly over the past year. The sector accounts for the largest share in value added in Ida-Viru county (51%), and for the smallest share in Harju (23%), Põlva (26%) and Tartu (27%) counties. While the reason for the small share in Harju and Tartu counties is a large service sector, Põlva county has a large agricultural sector.

The agricultural sector accounted for 3% of the gross value added of Estonia in 2017. This sector had the largest share in Jõgeva county (18%), followed by Viljandi (16%) and Põlva (13%) counties. While in general, the share of the sector in the value added of counties has shown a downward trend, it saw some increase in 2017 following a weak 2016. This was most notable in counties where the sector has a larger share in value added.

In 2017, GDP per capita was 17,943 euros, which is 1,464 euros more than a year earlier. GDP per capita was highest in Harju county – 144% of the Estonian average. Harju county was followed by Tartu and Pärnu counties, where GDP per capita amounted to, respectively, 92% and 69% of the Estonian average. The lowest GDP per capita was recorded in Põlva county – 42% of the Estonian average. In recent years, the GDP per capita of many counties has been approaching the Estonian average. This is most notable in Lääne, Saare and Valga counties. The gap between Harju county and the Estonian average has also narrowed. This means that the per capita GDP of the rest of Estonia is getting closer to Harju county.

Read more from Statistics Estonia

Using the budget to stimulate the economy was a mistake

  • Living standards in Estonia are at almost 80% of the European Union average
  • Further growth in the economy will be restrained by the fall in investment by companies and the slow growth in productivity
  • The economy continues to grow faster than its long-term sustainable rate
  • Labour shortages would have been less of a problem if the government had not given the economy a boost

Statistics Estonia estimates that GDP was up over the year by 3.7% in the second quarter and by 1.4% over the first quarter, adjusted seasonally and for the calendar. Data from earlier years were adjusted and showed that living standards in Estonia have reached almost 80% of the European Union average. The problem for the economy though is the fall in investment by companies and the slow growth in productivity.

The upward adjustment of GDP for 2016 and 2017 by almost 3% supports the opinion that the Estonian economy has been running at a high rate for some time now. This means it was a mistake to use additional fiscal measures to stimulate the economy in 2017. As the public and private sectors are competing for the same resources, the state giving the economy an additional boost during good times can squeeze out private sector projects. It is probable that labour shortages would have been less of a problem for businesses had the government not stimulated the economy.

Although the growth in the economy was slower last year, it continues to be faster than the long-term sustainable rate for the Estonian economy. The rapid growth has until now been supported by increased participation in the labour force and growth in employment, but growth in productivity has been slow. Labour productivity rose by only one per cent in the second quarter. As the labour force participation rate in Estonia is already quite high compared to the rates in other European countries, it is unlikely that employment can continue to increase in the same way in the longer term. If productivity does not rise faster, the economy will grow more slowly in future.

Productivity growth requires investment, but earlier data for GDP show that investment by companies has fallen. However, the good times in the economy should favour growth in investment. The fall in investment may have been partly caused by the orders from the state, though rapid growth in construction of residential property has also squeezed orders from companies out of the market. This is probably not the only cause of the fall in investment by companies though, as total investment has also fallen.

That said, it is not impossible that corporate investment has simply been underestimated. The GDP revision that raised GDP by almost 3% for 2016 and 2017 was accompanied by a substantial upwards revision in the data for corporate investment. Repeated corrections to the GDP figures in the same direction and an initial underestimation of GDP pose the risk that economic policy decisions are taken on the wrong foundations and can knock the economy out of balance. This makes it imperative that the accuracy of statistical estimates be improved and that economic policy decisions be taken following thorough analysis.

 

Source: Bank of Estonia

Author: Kaspar Oja, Economist at Eesti Pank

Consumer price index affected the most by housing

According to Statistics Estonia, the change of the consumer price index in July 2018 was 0.1% compared to June 2018 and 3.5% compared to July of the previous year.

Compared to July 2017, goods were 2.9% and services 4.4% more expensive. Regulated prices of goods and services have risen by 10.1% and non-regulated prices by 1.7% compared to July of the previous year.

Compared to July 2017, the consumer price index was affected the most by housing, which contributed nearly a third of the total increase. Over a half of the latter was contributed by electricity that reached homes, which became 16.9% more expensive. More than a fourth of the total increase was contributed by motor fuel. Petrol was 19.3% and diesel fuel 16.8% more expensive than in July 2017. A greater impact on the index came also from alcoholic beverages and tobacco, which were 9% and 7.6% more expensive, respectively. Compared to July of the previous year, the price of beer increased by 11.7%. Of food products, the biggest price increases were seen for frozen fruit and berries (26%) and eggs (22%), and the biggest price decreases for potatoes (30%) and sugar (23%).

Compared to June, in July the consumer price index was affected the most, on the one hand, by seasonal sales of clothing and footwear, and on the other hand, by housing where electricity that reached homes became 5.8% more expensive in a month. Alcoholic beverages also had a greater impact on the monthly change of the index, as after June discounts ended, there was a 3.1% price increase.

Change of the consumer price index by commodity groups, July 2018
Commodity group July 2017 –
July 2018, %
June 2018 –
July 2018, %
TOTAL 3.5 0.1
Food and non-alcoholic beverages 1.7 -0.5
Alcoholic beverages and tobacco 8.5 2.3
Clothing and footwear -1.4 -6.5
Housing 7.8 2.2
Household goods 0.2 -0.6
Health 4.1 0.1
Transport 5.7 0.4
Communications -3.6 -0.5
Recreation and culture 2.6 0.9
Education -3.9 0.0
Hotels, cafés and restaurants 4.1 1.4
Miscellaneous goods and services 3.1 -0.7

Statistics Estonia publishes the consumer price index on the 5th working day of each month, after the end of the reporting period. For the statistical activity “Consumer price index”, the main representative of public interest is the Ministry of Finance, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia

The price level rose by almost one per cent in a month

  • Prices of energy and services rose by most over the month
  • The electricity bill for a household with average electricity consumption may be 4-8 euros higher in the winter months
  • Prices for services rose because of rapid growth in wages

Data from Statistics Estonia show the consumer basket was 4% higher in price in June than a year earlier. The price level was 0.9% higher than in May because prices rose for energy and services. Energy prices increased mainly because of higher oil prices on the world market, while services prices were up because of strong growth in wages.

Energy prices have been lifted in recent months by higher prices for solid fuels and motor fuels. On top of this came a rise of 9% in the price of electricity in June, which raised the price of the consumer basket by 0.3%. Futures prices for electricity on the Nordic electricity exchanges indicate that the current high price of €50/MWh will be maintained until the start of next year. The electricity bill for a household with average electricity consumption could be 4-8 euros higher in the winter months in consequence. While the price of electricity is higher in the consumer basket, prices of other groups of goods will also rise as production costs are pushed up by the electricity price. This indirect effect will raise the price level only a little, as electricity is only a small part of the expenditures of businesses. Markets expect that the electricity price on the exchanges will fall in spring next year towards its average of the past decade of €35/MWh.

Inflation is expected to slow in Estonia in the second half of the year as the high reference base effect will be felt in inflation. The price level will rise for the year as a whole by around 3%.

Source: Bank of Estonia

Author: Sulev Pert, Economist at Eesti Pank

Consumer price index still on the rise

According to Statistics Estonia, the change of the consumer price index in May 2018 was 0.3% compared to April 2018 and 3.0% compared to May of the previous year.

Compared to May 2017, goods were 3.4% and services 2.4% more expensive. Regulated prices of goods and services have risen by 8.0% and non-regulated prices by 1.7% compared to May of the previous year.

Compared to May 2017, the consumer price index was affected the most by more expensive operation of personal transport equipment, which contributed over a quarter of the total increase of the index. Petrol was 14.8% and diesel fuel 11.9% more expensive compared to May 2017. Nearly a quarter of the total increase of the index was contributed by alcoholic beverages and tobacco, which became 13.6% and 5.5% more expensive, respectively. 32.7% more expensive beer contributed two thirds of the price increase of alcoholic beverages and tobacco. Food and non‑alcoholic beverages accounted for over a fifth of the total increase of the index, of which  60% was contributed by 5.4% more expensive milk, milk products and eggs, 12% more expensive ready‑made meals and 9.5% more expensive fresh vegetables. Compared to May of the previous year, of food products, the biggest price increases were seen for eggs (35%), frozen fruit and berries (28%) and butter (23%), and the biggest price decrease was seen for sugar (21%).

Compared to April 2018, in May the consumer price index was affected the most by food and non-alcoholic beverages. In May, eggs were 15.2% and some bakery products 5% more expensive compared to the previous month. A greater impact on the monthly change came also from catering services and accommodation, where the price increase was 1% and 9.4%, respectively.

Change of the consumer price index by commodity groups, May 2018
Commodity group May 2017 – May 2018, % April 2018 – May 2018, %
TOTAL 3.0 0.3
Food and non-alcoholic beverages 2.9 0.8
Alcoholic beverages and tobacco 11.2 0.3
Clothing and footwear 1.0 1.0
Housing 4.2 -0.3
Household goods -0.4 -0.2
Health 4.5 0.0
Transport 3.8 0.5
Communications -4.6 -2.2
Recreation and culture 1.3 -0.3
Education -5.4 1.3
Hotels, cafés and restaurants 4.0 2.5
Miscellaneous goods and services 3.2 0.4

Statistics Estonia publishes the consumer price index on the 5th working day of each month, after the end of the reporting period. For the statistical activity “Consumer price index”, the main representative of public interest is the Ministry of Finance, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia