According to Rosstat, the CPI added 0.15% over 1-11 March (vs. 0.19% in 1- 12 March 2012). Over the reported period (6-11 March), average daily price growth kept edging down to 0.013%, from 0.015% in the previous week (and below the 0.015% for 6-12 March last year). The key driving forces behind CPI growth this week were almost the same (in order of importance): potatoes (+0.9%), vodka (+0.4%), gasoline (+0.1%) and bread (+0.3%).
Meanwhile, the growth in fruit and vegetable prices accelerated to 0.5% WoW, from 0.3% WoW during the two previous weeks. It is worth noting that chicken prices kept deflating (-0.4% WoW).
Last week's CPI report suggests that during the first two weeks of March, CPI growth slowed in YoY terms, hinting at a downward trend for the annual growth in headline CPI. The main hurdle preventing the CPI from decelerating faster was a pickup in fruit and vegetables prices last week (potato remains among the key growth drivers along with gasoline and vodka). We expect prices on potatoes and gasoline to increase more and more modestly in the weeks to come, owning to the high base effect. In addition, the growth in the price of vodka is set to slow as it can now mostly be explained by the knock-on effect of the hike in minimum prices on alcoholic beverages in early January.
Hence, we still expect February’s 7.3% YoY CPI reading to be the peak for FY13 and anticipate the indicator slowing to 7.1-7.2% YoY in March. In our view, once the CPI slows, the regulator will launch the easing cycle (we are sticking to our out-ofconsensus view of the first cut in base rates in April).