OREANDA-NEWS. November 15, 2012. According to Statistics Estonia, the consumer price index grew by 0.2% in October compared to the previous month. Though the monthly price growth of goods and services was slower than in September, inflation accelerated to 4.1%, year-on-year. Eurostat’s flash estimate shows that euro area inflation was 2.5% in October.

Compared to a year ago, energy price has increased the most in Estonians’ consumer basket (8.6%). Food inflation slowed steadily from the start of 2011 until April this year, but it has been picking up again gradually since May, mostly due to the price growth of fruit, vegetables and meat, reaching 6% in October. In addition, the global market price of cereal hiked in August and that of cooking oil in September (6% and 10%, respectively). The impact of these increases is likely to pass through to food prices in Estonia in the coming months, so food inflation may gain impetus.

Core inflation remained low in October – the cost of the consumer basket excluding food and energy increased 1.5%, year-on-year. Domestic factors driven core inflation has been stably low for the past two years, but acceleration risks have increased during that time. Wage growth has so far not yet adjusted to the slowdown in economic and labour productivity growth which started at end-2011. As a result, labour costs may pass through to the final price of goods and services, so core inflation may pick up. Though it is normal for wage growth to react to economic developments with a lag, it should be in line with productivity growth and not exceed it in order to maintain competitiveness and price stability in the longer term.