2011-10-10 - Monthly inflation in Estonia and Lithuania accelerated (MatasM)
Both Estonia and Lithuania saw an increase in monthly consumer inflation in September: in Estonia prices jumped by 0.5%, while in Lithuania they soared to 0.7% m/m.
The annual inflation in Estonia eased from 5.5% to 5.2% y/y on the back of declining food prices and communication costs. The decline in prices, however, was less pronounced, compared to our estimate (4.7 % ) and market expectations (4.9%). In Lithuania consumer prices went up from 4.4% to 4.5% y/y, while we have expected the annual inflation to stand still.
Recently rising prices and unstable global outlook weigh negatively on consumer confidence in both countries. In Estonia, consumers’ expectations fell to the lowest level in 17 months (-7), while in Lithuania it dropped by 2 p.p. in one month to -19. Inflationary expectations in upcoming 12 months did not show any increase in Estonia and Lithuania, and were respectively 18 and 44 points. A year ago the indicator stood at 44 points in both countries.
Assessment: We expect consumer prices to ease by the end of the year in both Estonia and Lithuania, mostly due to higher base effect. However, the start of the heating season is expected to bring confidence down further, as it empties pockets of the households.
Jekaterina Rojaka
Chief E conomist
