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Weekly CPI points to a slowdown in annual CPI growth to 7.2%

 
28.03.2013

According to Rosstat, the CPI added 0.35% over 1–25 March (vs. 0.47% for 1–26 March 2012). During the reported period (19–25 March), the average daily price growth stayed the same as the previous week, at 0.014% (and visibly lower than the 0.018% for 20–26 March last year). The key driving forces behind CPI growth this week were (in order of importance): tariffs on cold water supply (+1.0% WoW) as well as the prices of potatoes (+1.2%) and vodka (+0.5%). Meanwhile, the growth in fruit and vegetable prices accelerated to 0.5% WoW, from 0.4% WoW during the previous week. It is worth noting that chicken and sugar prices kept deflating, and that the tariffs on hot water supply declined visibly (-1.7% WoW).

Last week’s CPI report suggests that during the first 25 days of March, CPI growth slowed in YoY terms to 7.2%. Tariffs on cold and hot water supply have moved sporadically, so we are mainly concerned by potato and vodka prices, as they have been persistently spurring the CPI since the beginning of this year. We reiterate that potato prices are 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.

Overall, 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-of-consensus view of the first cut in base rates at the next CBR policy meeting on 2 April).

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

Tags:
Rosstat, CPI, Russia

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