October’s price increases in Estonia were a nasty surprise, though prices had been expected to rise at the end of the year, according to Lenno Uusküla, chief economist at Luminor.

Prices in Estonia rose rapidly this October. According to preliminary estimates from Statistics Estonia, prices increases by 4.5 percent on year making October the worst month of 2024. In August and September, annual inflation was at 3.2 percent. Between September and October however, the consumer price index rose by 0.8 percent.

According to Lenno Uusküla, chief economist at Luminor, October brought yet more bad surprises when it comes to price rises.

“In this sense, the year-end price increase was expected and Luminor also raised its inflation figures for this year: three percent in spring and four percent now in fall. It is precisely because this new wave of wage increases is likely to come, precisely due to the cost-based wage increases, not from increased efficiency,” Uusküla said.

Consumers in Estonia have become more price sensitive. This is clearly visible in Tallinn’s T1 shopping mall, which predominantly contains discount stores belonging to well-known brands.

“Today, when clearly the purchasing power has dropped a bit, people want to get bargains for themselves, so they come to the outlet store and still get a very high quality product, but at a more reasonable price. /…/ We are in a sense swimming a little bit against the tide in terms of the market, so that in October we will actually have the highest footfall for the last five years,” said Tarmo Hõbe, CEO of T1 Shopping Mall.

“The general price increase is being very clearly felt by all consumers here in Estonia, as well as in comparison with the rest of the world. /…/ If we still see that retail trade is falling, continues to fall, then at some point prices will have to come down. I believe that at some point there will be a kind of rebalancing and prices will settle down,” Hõbe explained.

According to electronics store Euronics, because the number of people buying higher-end home appliances has fallen, prices have even had to be cut in some areas.

“As the household appliances and home electronics sector is also in decline across Europe, our prices have fallen a little bit,” said Jan Andre, purchasing manager at Euronics.

There’s nothing to cheer about next year either, when price growth will reach five percent, Uusküla said, which will be overwhelming for consumers.

“That’s because if we’re talking here about a six percent wage increase in the context of next year, the tax increase will take a couple of percent off and prices will increase by four to five percent. So, there won’t really be anything left for the employee even after that wage increase that companies are offering. And that is where our local efficiency falls down, but also our export competitiveness is decreasing too,” Uusküla said.

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