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Russian CPI deflated 0.04% last week

According to Rosstat, during 1-27 August CPI increased 0.16% with negative growth last week (-0.04% WoW), holding YoY growth at 5.9% so far. On 21-27 August, average daily price growth dived into the red to -0.005% vs. the strong 0.012% daily growth in the previous week (the same week of last year registered 0.016% deflation, the record for 2011). The key movers in CPI were balanced that week: on the one hand, flour, bread, and chicken added to CPI growth (+1.4% WoW, +0.6% WoW, and +0.8% WoW accordingly) and petroleum prices growth accelerated 0.5% WoW, on the other hand, deflation in fruit and vegetables was at 2.6% WoW, on average (in particular, prices for cabbage were down 4.1% WoW).

Along with the well-known reasons for CPI growth, which have remained unchanged since late July, i.e. seasonal deflation in fruit and vegetables and harvest problems, we are now seeing rising petrol prices, which have been back on the growing path since mid-August.

We amend our forecast to 0.2% MoM and 6.0 % YoY on the increase in consumer prices in August (which exactly matches the regulator’s upper boundary of the inflation target range for 2012). Given the planned hike in tariffs on 1 September and much lower deflation in fruit and vegetables in early September, we expect CPI YoY growth to exceed the 6.0% threshold during the week ending 3 September. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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