Central banker: labour market supports low inflation
07.09.2010, 15:30Martin Lindpere, economist of Eesti Pank, says that as data for the second quarter suggests, adjustment of wages is coming to an end together with the economic recovery.
According to Lindpere, this will not bring along price pressures in the economy as a whole as economic growth has been achieved by means of higher productivity, which has made it possible to contain labour costs. In the aftermath of serious economic downturn, the price pressures are expected to remain low due to spare capacity.
According to Statistics Estonia, the cost of consumer basket remained unchanged in August and inflation was 2.9% compared to August 2009.
In the first seven months of 2010, the price increase of food and non-alcoholic beverages in Estonia was one of the sharpest in the European Union, reaching approximately 6%. Although the increase in consumer prices was partly driven by higher export volumes, the retail trade margin also increased. The trade margin of unspecialised stores trading predominantly in food and tobacco products and beverages increased to 20% in the second quarter of 2010, compared with 18% at the end of 2009.
In August, prices of tobacco products increased by 2.4% compared with the previous month. The increase was driven by the unwinding of inventories accumulated at the end of 2009.
The food price increase has been higher than expected in Eesti Pank's spring forecast.
The central bank will publish an updated inflation assessment for the years to come together with the autumn economic forecast on 29 September.