OREANDA-NEWS. November 11, 2009. According to Statistics Estonia, in October the price level lowered 0.1% month-on-month and 2.2% year-on-year. Inflation in Estonia is rather close to the Maastricht inflation criterion, reported the press-centre of Eesti Pank.

The short-term fluctuations in the monthly inflation rate over the past half a year have been mainly caused by energy-related goods and changes in taxation, but the general downward trend in prices has nevertheless continued. Thermal energy has gone up in price by a total of 10% over the past couple of months, although it is still more than a tenth cheaper compared to the start of the year.

The share of services in the declining price level will increase in near future. The data of the Estonian Institute of Economic Research show that about one in six trading-sector enterprises is expecting prices to fall in the next months, whereas in the services sector price drops are anticipated by just an average of one out of four companies.

The economic downturn has shown self-discipline needs to be tightened in the parts of the economy where the prices of goods need administrative approval. Expenditures have gone up in several fields of activity, whereas productivity indicators do not confirm this has been caused by increased efficiency. Expenditure growth has been offset by price hikes. For instance, the costs of housing-related services have grown by nearly a tenth year-on-year.

As regards the euro area, preliminary estimates for October show the consumer basket was some 0.1% cheaper there year-on-year, and the risk of price rises in the external environment continues to be low. This is also confirmed by the decisions of major central banks to leave the monetary policy interest rates unchanged. Although global economic growth has resumed, risks to the outlook persist.

The majority of the decline is over for Estonia as well, but the country is still lacking economic potential to enter a new growth cycle. The amount of enterprises planning to cut jobs still exceeds the number of those intending to hire in the months to come. Labour market indicators show households continue to curb their consumption expenditure, which means demand pressures on prices remain weak.