Estonia March inflation eases to 10.9 pct y/y

Dearer motor fuel, bread and vegetables helped push Estonian consumer prices up by 0.8 percent last month to stand 10.9 percent higher than a year earlier, the national statistics office said on Monday.

Analysts had forecast the consumer price index (CPI) would rise by only 0.4 percent in March for a 10.4 percent year on year increase.

"The consumer price index was mainly influenced by an increase in the prices of motor fuel, bread products and fresh vegetables. Electricity was 2.4 percent cheaper compared to the previous month," Statistics Estonia said in a statement.

The month on month increase of 0.8 percent was double the February rate.

But the year on year rise of 10.9 percent was down from the previous month's near 10-year high of 11.3 percent, reflecting a sharp 1.0 percent month-on-month jump in the CPI in March last year.

"The slowing of inflation from February's peak was expected and in the coming months price growth will remain over 10 percent," the Finance Ministry said in a statement.

It expected annual average inflation this year of 9 percent.

The central bank said price growth was mostly affected by increases in motor fuel, which added 0.3 percent to the monthly price growth, and shopkeepers had started to adjust prices up after holding back rises for the last two months.

It noted that clothing prices in the Baltic country were now more expensive than the EU average.

Estonia and the other two Baltic states have been subject to rating or outlook cuts by ratings agencies due to economic imbalances, such as high inflation, wide current account deficits, and fears of a sharp economic slowdown.

The Finance Ministry warned that there would be further increases in housing costs in April as heating prices would rise on the back of increases in natural gas prices.

Estonia increased excise duties on heating costs during 2007 and on fuel from January 1, 2008.
(Reporting by David Mardiste; Editing by Jan Dahinten/David Christian-Edwards)

Source: Reuters, Monday April 7 2008

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