Estonia's producer prices rise faster than consumer prices

Estonia's industrial producer prices saw a year-on-year increase of 3.5% in July, following a 3.7% rise in June, according to Statistics Estonia. This "factory gate" price index, which reflects changes in the prices of manufactured industrial goods and sold industrial services, indicates that price hikes will eventually reach consumers.

The most significant price increases occurred in the production of coke and refined petroleum products, including shale oil, which became 31% more expensive over the year. The rising global oil prices also impacted the production of rubber and plastic products, up 11%, and electricity and gas supply, up 8.4%. The cost of metal and wood production also rose, by 6% and 4.5% respectively, influencing construction prices.

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Essentially, these are so-called factory prices, to which a commercial markup is added before they reach the end consumer.

However, some sectors experienced price decreases. Food production costs fell by 1.5% and textile production by 2.6%. The repair and installation of machinery and equipment also became cheaper. While higher prices benefit Estonian exporters in foreign markets, chief economist Raul Eamets of Bigbank noted that these increases will inevitably be passed on to domestic consumers.

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On the one hand, it's good that our export sector companies can charge higher prices on the foreign market, their incomes grow. At the same time, on the domestic market, producers' price changes will sooner or later reach the ordinary consumer's wallet.