According to Rosstat, CPI growth was 0.06% during 1-4 March (bringing the YTD print to 1.6%). Over the reported period, average daily price growth edged down to 0.015%, from 0.023% in the previous week (and below the 0.018% for 1-5 March last year). The key driving forces behind CPI growth this week were almost the same (in order of importance): gasoline (+0.3%), vodka (+0.6%), potatoes (+0.7%), and rye bread (+0.5%). Meanwhile, the growth pace in fruit and vegetable prices stayed at 0.3% WoW (the same as during the previous week). It is worth noting that chicken prices kept deflating (-0.5% WoW).
Last week's CPI report suggests that after a surprising spike in daily price growth during late February, it reverted to a downward trend. The beginning of spring brought lower daily prices growth (0.06% for 1-4 March) than a year ago (0.07% for 1-4 March 2012). This is definitely supportive for our view that February marked the FY13 peak for headline CPI and in March we are to see a slowdown in the indictor (to 7.1-7.2% YoY). This will open the way for the policymakers to start cutting key rates as soon as in April. In addition, core inflation is likely to return on its downwards trend, in our view, and therefore headline CPI will likely slow towards 5.4% YoY eop-FY13.
Maxim Oreshkin, Daria Isakova, Dmitri Fedotkin
VTB Capital analyst
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