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CPI added 0.42% on 1-14 January


According to Rosstat, CPI growth reached 0.42% during the first half of January (vs. 0.5% MoM for the whole of December). Over 1-14 January, the average daily price growth edged down to 0.028%, from 0.031% in the previous week (and 0.017% for 1-16 January last year). The key driving forces behind CPI growth this week were vodka (+2.9%), potatoes (+2.1%), cabbage (+3.9%), central heating (+0.1%), and gasoline (+0.1%).

Meanwhile, fruit and vegetables prices decelerated slightly, adding 1.8% WoW vs. 2.0% during the previous week. 

The recent reading implies that daily price growth was sticky at a rather strong level, spurred mostly by the second round effect of the hike in minimum vodka prices on 1 January 2013 (this can explain the around 0.09pp of a 0.14% combined increase in prices during 10-14 January). Furthermore, growth in the prices of fruit and vegetables is still heavy and we expect the unfavourable base effect in the food component to put upwards pressure on it over the coming months.

As far as January CPI growth is concerned, given that a bunch of technical drivers have taken place early this year (such as the hike in minimum vodka prices, increase in excise on tobacco and gasoline, and tariffs for railway services), we see the full-year reading at closer to 0.9% MoM and 7.0% YoY (vs. 0.5% MoM and 6.6% YoY in December). To add, core inflation is set to persist on its downwards trend, in our view, and thereby headline CPI will likely slow towards 5.4% YoY eop-FY13. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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