According to Rosstat, the CPI added 0.25% over 1–18 March (vs. 0.27% in 1–18 March 2012). Over the reported period (12–18 March), the average daily price growth edged a notch up to 0.014%, from 0.013% in the previous week (and slightly above the 0.013% for 6–12 March last year). The key driving forces behind CPI growth this week were (in order of importance): potatoes (+1.2%), vodka (+0.4%), tariffs on water supply (+0.3%), gasoline (+0.1%), and rye bread (+0.6%).
Meanwhile, the growth in fruit and vegetable prices decelerated to 0.4% WoW, from 0.5% WoW during the previous week. It is worth noting that chicken and sugar prices kept deflating.
Last week’s CPI report suggests that during the first three weeks of March, CPI growth slowed in YoY terms (0.25% in 1–18 March 2013 vs. 0.27% in 1–18 March 2012), potato and vodka prices as well as the (probably one-off
) spike in some utilities tariffs were the main growth drivers last week. We expect prices on potatoes to increase more and more modestly in the weeks to come, owing 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).
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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