Inflation picked up a little in May

  • The immediate impact of the higher oil price on consumer prices has eased
  • Faster GDP growth will encourage inflation this year in Estonia and in the other countries of the euro area
  • Inflation will remain high until the end of the year

The rise in the consumer price index accelerated in the figures from Statistics Estonia to 3.3% in May 2017. Energy prices were up 5.3% over the year, and food prices, including alcohol and tobacco, were up 6.2%. Core inflation slowed to 1.2% though.

The structure of inflation has changed somewhat in recent months as energy prices are not rising as fast, but the broad-based inflation for food products continued in May. Estonia is something of an exception among euro area countries for the rapid rise in prices of food products. Inflation in May also saw some individual large changes in services prices, with prices for accommodation services standing 11% higher than they were a year earlier, possibly because of the Estonian Presidency of the European Union. Among residential services it was rent and waste disposal that drove inflation, but this was offset by cheaper communications services.

The immediate impact on consumer prices of the rise in the oil price that started in early 2016 has now eased. In January the global oil price was still 80% higher than it had been a year earlier, but by the end of May the difference over the year had dropped almost to zero. Prices of motor fuels were up 11% in May in Estonia, some 5 percentage points of which was due to the rise in excise on fuel in February. The indirect consequence of the higher oil price is transmitted into a second wave of inflation in prices for natural gas and heating energy. The prices of food and industrial commodities have fallen moderately on the global market in recent months. Commodities prices are being pushed down by uncertain demand in Asian countries.

The Estonian economy has improved noticeably since the second half of last year, and that has boosted the rise in consumer prices. Corporate profits increased in the first quarter by more than labour costs did for the first time since 2014, and they were helped in this by rapidly growing domestic demand and a revival in external demand. Corporate revenues rose because of increased export volumes and higher export prices, while on the cost side, the growth in wages slowed. The improved economic circumstances allowed companies to increase their profit margins and that will lead core inflation to rise in the second half of the year.

Inflation in Estonia is likely to remain high until the end of this year, because of both demand-side and supply-side (or cost-side) inflation factors. The coming months will see additional inflation caused by a rise in excise on alcohol. The key to long-term developments in prices is the price of oil on the global market, because oil has been relatively cheap for several years now. Eesti Pank will publish a new inflation forecast on 14 June 2017.

Inflation in Estonia and euro area

See better graph on Bank of Estonia website here

Author: Sulev Pert, Economist at Eesti Pank

Current account remains in surplus with backing from strong exports

  • The current account was unusually in surplus in the first quarter
  • More was paid back in debt liabilities to investors than was received as new investment in the country
  • The threat of external imbalance in the economy receded and the economy is close to the limits set by the European Commission

The surplus on the current account was 99 million euros in the first quarter, or about 2% of GDP of the same quarter. The current account was in surplus in the first quarter for the first time since 1993. The balance was more positive than usual mainly because of fast and quite broadly based growth in services exports and an unusually small net outflow of income. Estonia’s trading partners are doing well and so the demand for Estonian goods and services has increased. Sectors like transport services and oil production that had earlier been a drag on export growth are either approaching the bottom or have already reached it and are now starting to grow again. On the income side, the outflow of investment income was reduced primarily in the banking sector, but an important role was also played by one-off factors like fines paid to the Estonian state.

New direct investment of 188 million euros was made in the first quarter into the equity capital of foreign-owned companies, which is double the average of the past five years. At the same time, earlier direct investment was reduced by 177 million euros, meaning that the net sum was a modest inflow of new money into the country. Overall the total amount of direct investment in Estonia still declined, as more was paid back in debt liabilities to investors than was received as new investment. Estonia’s direct investments abroad increased slightly, and also at the expense of debt investments.

Estonian assets abroad grew more in the first quarter overall than external liabilities, so Estonia was a net lender. The net international investment position, which is the difference between external assets and external liabilities, continued to improve and climbed to -36% of GDP. This means Estonia is very close to the minimum set by the European Commission of -35%1. The Estonian economy is currently in a position where external demand has recovered and so the confidence of companies is relatively high. As further economic growth can mainly be achieved through investment and increased productivity, it is probable that net lending to the rest of the world cannot continue to this extent.

The European Commission looks at the net international investment position as one of the indicators of possible imbalances in an economy, and it has set the threshold for where the threats appear at -35% of GDP.

Source: Bank of Estonia

Author: Kristo Aab, Economist at Eesti Pank

14 pct more hotel visitors than in April 2016

According to Statistics Estonia, 257,000 domestic and foreign tourists stayed in Estonian accommodation establishments in April 2017, which was 14% more than in April 2016.

157,000 foreign tourists and 100,000 domestic tourists used the services of accommodation establishments; their numbers increased 12% and 16%, respectively, compared to April of the previous year. 67% of the foreign tourists who used accommodation services came from the neighbouring countries – 77,000 tourists came from Finland, 16,000 from Russia and 13,000 from Latvia. Compared to April 2016, the number of tourists from neighbouring countries increased 12%. There was also an increase in the number of tourists arriving from several European countries – from Sweden, Germany and Lithuania. 15% more tourists arrived from Asian countries. 44,000 foreign tourists stayed in accommodation establishments located outside of Tallinn, including nearly a third of them in Pärnu and a quarter in Tartu. 4% of the foreign tourists who used accommodation services stayed in the accommodation establishments of Ida-Viru county and 2% in those of Saare county.

39% of the customers of accommodation establishments were domestic tourists. 62% of them were on a holiday and 26% on a business trip. 30% of the domestic tourists stayed in the accommodation establishments of Harju county, 15% in Pärnu county and 16% in Tartu county. In most counties, the number of domestic tourists staying in accommodation establishments increased compared to April 2016.

In April, 972 accommodation establishments offered services for tourists. 20,000 rooms and 45,000 beds were available for tourists. 45% of the rooms and 35% of the beds were occupied. The average cost of a guest night was 37 euros, i.e. three euros more than in the same month of the previous year. The average cost of a guest night was 43 euros in Harju county, 35 euros in Tartu county and 30 euros in Pärnu county.

Read more from Statistics Estonia

Most popular movie is “Class Reunion”

According to Statistics Estonia, the most popular film in Estonian cinemas in 2016 was the Estonian comedy “Class Reunion”. In the cinema attendance rankings since the restoration of independence, “Class Reunion” came second after James Cameron’s “Avatar”.

In the attendance rankings since the restoration of independence, “Class Reunion” had approximately 189,100 viewers, only 5,000 viewers short of the record set by James Cameron’s “Avatar”. Thus, it became the most viewed Estonian movie since the restoration of independence. “Class Reunion” also became the first film to gross over a million euros in the Estonian market – no Hollywood movie has reached this milestone.

Despite the success of “Class Reunion”, only 21 Estonian films were screened last year – the number was three times higher in 2015. In Estonian cinemas, 199 films from other European countries and 138 films from the United States were screened. In total, cinemagoers could choose from 377 films in 2016. Besides “Class Reunion”, “Ice Age: Collision Course” (approx. 133,200 viewers) and “The Secret Life of Pets” (approx. 121,600 viewers) also made it into the top three of viewer rankings.

In 2016, there was also a record number of cinema visits – a total of nearly 3.3 million visits were made to Estonian cinemas, which is 200,000 more than the year before. Although more than a third of the films screened in 2016 were produced in the USA, US films still had nearly twice as many viewers as films from other countries in total. While the average ticket price for Estonian and other European films was 5.1 euros, cinemagoers had to pay on average 40 cents more to see an American movie.

In 2016, a total of 27 full-length films were produced in Estonia – 13 feature films and 14 documentaries. There were also 19 short feature films, 74 short documentaries and 21 short animations produced. No full-length animations have been produced in Estonia in the last four years.

Films screened in Estonian cinemas by country of origin, 2005–2016

Full-length film – a movie with a duration of at least 60 minutes or a video of at least 52 minutes. Short film – a movie with a duration of up to 59 minutes or a film for television with a duration of up to 51 minutes.

Source: Statistics Estonia

11,200 job vacancies in Estonia

According to Statistics Estonia, there were over 11,200 job vacancies in the enterprises, institutions and organisations of Estonia in the 1st quarter of 2017. This is the highest number of job vacancies in the past 8 years. While in the previous quarter, the number of job vacancies reached slightly above 9,000, in the 1st quarter, the number of job vacancies increased by 24%.

The number of job vacancies in the 1st quarter of 2017 was more or less the same as the record level reached in the 3rd quarter of 2016, when the number of job vacancies exceeded 11,000 for the first time in seven years. In the 1st quarter, however, the number of job vacancies exceeded the previous record by 140 vacancies. Compared to the 1st quarter of 2016, when the number of job vacancies exceeded 8,200, the number of job vacancies increased by 35%.

The share of vacant and occupied posts in the total number of posts continued to be the highest in manufacturing (19%), wholesale and retail trade (16%) and education (10%).

The rate of job vacancies, i.e. the share of job vacancies in the total number of jobs, was 2.0% in the 1st quarter of 2017, which is 0.3 percentage points higher than in the 4th quarter of 2016 and 0.5 percentage points higher than in the 1st quarter of 2016.

In the 1st quarter, the rate of job vacancies was the highest in administrative and support service activities (4.0%) and accommodation and food service activities (3.2%). The rate of job vacancies was the lowest in water supply; sewerage, waste management and remediation activities (0.9%), mining and quarrying (1.0%) and real estate activities (1.0%).

Most of the vacant posts were available in Harju county (70%) (including 57% in Tallinn), followed by Tartu county (8%) and Ida-Viru county (4%). The rate of job vacancies was the highest in Harju county (2.4%) and the lowest in Hiiu (0.5%), Saare (0.9%) and Valga (1.1%) counties.

Three quarters, or 75% of the vacant posts were in the private sector. In the 1st quarter of 2017, the rate of job vacancies was the highest in state organisations (2.7%) and foreign private-sector institutions (2.5%). The rate of job vacancies was the lowest in local government organisations (1.1%).

Read more from Statistics Estonia

In April, trade growth slowed down

According to Statistics Estonia, in April 2017, the exports of goods decreased by 1% and imports increased by 2% compared to April 2016. A decrease in the exports of electrical equipment significantly contributed to the decline in exports.

In April 2017, exports from Estonia amounted to 1 billion euros and imports to Estonia to 1.2 billion euros at current prices. The trade deficit was 189 million euros (in April 2016, it was 158 million euros).

The top destination countries of Estonia’s exports in April were Finland (16% of Estonia’s total exports), Sweden (15%) and Latvia (9%). The biggest decrease occurred in exports to Sweden (down by 49 million euros), where less electrical equipment was exported. Exports to Germany (up by 16 million euros) and the Netherlands (up by 13 million euros) increased the most. These rises are mainly due to increased exports of base metals and articles of base metal to Germany and of mineral products (incl. shale oil) to the Netherlands.

The biggest share in exports was held by electrical equipment, followed by wood and articles of wood, and base metals and articles of base metal. The greatest decrease was in the exports of electrical equipment (down by 56 million euros). At the same time, growth took place in the exports of mineral products (up by 36 million euros) and base metals and articles of base metal (up by 23 million euros).

The share of goods of Estonian origin in total exports was 72% in April. In April 2017, the exports of goods of Estonian origin decreased 3%, while re-exports increased 4%. The fall in the exports of goods of Estonian origin was affected the most by a decrease in the exports of electrical equipment (incl. communication equipment) and agricultural products and food preparations (incl. cereals). At the same time, the exports of mineral products (incl. shale oil, electricity) grew.

The main countries of consignment in April 2017 were Finland (13% of Estonia’s total imports), Germany (11%), Lithuania (9%), Poland (9%) and Sweden (9%). The biggest increase occurred in imports from Turkey (up by 24 million euros, i.e. 5 times) and Russia (up by 20 million euros). Mostly transport equipment was imported from Turkey and mineral products from Russia. Imports from the USA decreased the most.

In April, the main commodities imported to Estonia were transport equipment, electrical equipment, mechanical appliances and agricultural products and food preparations. The biggest increase was in the imports of transport equipment and mineral products and the biggest fall occurred in the imports of electrical equipment.

In April 2017, the foreign trade export volume index decreased by 15% and the import volume index by 4% compared to the same period of the previous year.Estonia’s foreign trade by month, 2015–2017

Read more from Statistics Estonia

Border maintenance workers arrested by Russian border guard

Two men using a road on Russian territory to get from one Estonian village to another were arrested by Russian border guards on Thursday. Unaware that they had left Estonia, they stopped their vehicle, which according to current agreements between the two countries isn’t allowed. They were subsequently arrested and taken in for identity checks, but allowed to return after paying a fine.

Read more from ERR News