OREANDA-NEWS. March 10, 2011. According to the consumer price index of Statistics Estonia, price growth picked up in February, amounting to 0.6%, month-on-month. Year-on-year, the price level was 5.7% higher, reported the press-centre of Eesti Pank.

Nearly half of the February price increase derived from the unusual 14% hike in vegetable prices.

In addition to vegetables, other extraordinary price rises in February included household textiles (3.9%), car insurance (4.6%), margarine (7.7%), alcohol served at restaurants (3.2%), and flowers (4.4%). However, these have impacted the general price level very little, by less than 0.1pp.

The labour-market situation has slightly improved, but this has not given much impetus to inflation. Employment enjoyed dynamic growth in the past quarter of 2010, and the restoration of performance pays in December shows that the situation is improving for companies. Although core inflation has risen every month, it is still low at 0.9%. Current oil and food price hikes should by no means become the reason for wage growth. Remuneration should depend on the productivity of employees.

Oil prices have for some time been higher (88.6 dollars per barrel) than assumed in Eesti Pank's autumn forecast. Since this will impact inflation in different ways, the latter is also likely to be faster than expected. Food commodity prices also continue to increase in the global market. If we compare food prices in Estonia with other EU countries, it can be said our prices have in many areas reacted in advance. This is most true for cereal and dairy products. However, global market developments have not yet passed through to the price of meat products, partly due to stronger competence in that sector.

Although commodity prices have grown in the global market, inflationary expectations in the euro area have nevertheless remained close to the target.