Consumer price index, 15 August 2001

In August 2001 the CPI stood at 108.1 (1998=100), while in August 2000 it was 105.3.

Price change from July to August: Summer sale

The prices of clothing and footwear decreased by 1 percent from July to August due to the seasonal summer sale. A greater price decrease was recorded in footwear compared to clothing. Summer sale caused a price decrease of furniture, household appliance and audio-visual equipment as well.

The prices of food fell by 0.4 per cent in August mainly caused by lower prices of fresh fruit and vegetables and meat.

The petrol prices declined by 0.8 per cent last month. From May to August the prices of petrol has fallen by 12.4 per cent.

Social protection showed a price decrease of 1.5 per cent caused by lower fees of public kindergarten. The fall in the fees is due to increased kindergarten subsidy that was implemented in July 2001. For further details, see link : Household Payments in Kindergartens .

Sales activity on appliance for personal care also contributed to the total price decrease last month

Both rental for housing and cost for owner-occupied housing went up by 0.2 per cent from July to August. Maintenance of dwellings showed a price increase as well. Together with higher prices of dental services and accommodation services this dampened the price decrease for July to August.

Year-to-year change: 2.7 per cent rise

The CPI rose by 2.7 per cent from August 2000 to August 2001. The increased tariffs on electricity are the major contributor to the price growth. The electricity tariffs have increased by 41.3 per cent during the last 12 months.

Another contributor to the price growth is the transport sector. There has been a strong increase in the prices of passenger transport by road and air during the last 12 months. The passenger transport by air has increased the most by 19.9 per cent.

The petrol prices was 10.9 per cent lower in August this year compared with August last year, mainly due to lower taxes and oil prices.

Higher prices of hairdressing and some appliances for personal care and higher prices of different services for social protection also contributed to the year-to-year change in August.

The effect of the VAT (value added tax) reform that was introduced in July could be observed by the decline in the prices for food and beverages in August. The food prices were 6.2 per cent lower in August this year compared with August last year. The prices of dairy products and meat are among the contributors to the piece decrease.

In addition to lower prices on food and beverage and petrol, audio-visual equipment and telephone products have dampened the price increase in August as well.

Tax changes in the CPI

The VAT reform was implemented on the 1 of July. The general VAT rate on food and non-alcoholic beverages decreased from 24 to 12 per cent and general VAT was introduced on a number of services. The VAT reduction on food and non-alcoholic beverages are estimated to cause a decrease in the price growth by 1.2 percentage point while the VAT introduction on services contributes 0.2 percentage point to the price growth. The estimates are based on an assumption of direct and full transfer of indirect taxes and subsidies in the consumer prices that are directly affected.

Former model-based estimates show that the change in the general VAT rate from 23 to 24 per cent that was introduced at the turn of the year and the VAT reduction is estimated to decrease the year-to-year growth by 0.4-0.5 percentage point. Without the VAT changes and changes in other taxes the year-to-year growth in August is estimated to 3.2 -3.3 per cent.

The year-to-year change in the CPI excluding electricity was 1.3 per cent in July while the CPI excluding energy products was 1.6 per cent (corrected from 1.7 per cent 10.09.01 at 2 o'clock p.m.). Excluding taxes and energy products the CPI would have risen by about 2.0-2.1 per cent (corrected from 2.1 - 2.2 per cent 10.09.01 at 2 o'clock p.m.) in August.