Over the reported period (9-15 July) the key CPI growth drivers remained electricity and heating as well as water supply costs, but their contribution to inflation continued to abate (vs. 1 July – the day of the tariff hike). Hence, the recent weekly CPI report supports that the second-round effect of tariff increases is very mild this year.
Meanwhile, fruit and veg. prices started to deflate last week, providing additional support to our view of a good harvest this year, which combined with the poor harvest last year is to push YoY growth in food prices down in coming months and thereby will contain headline CPI annual growth as well.
According to our calculations, headline CPI YoY growth slid to 6.5% YoY as of 15 July. We slightly adjust (downward) our forecast for full-July monthly inflation to 0.7-0.8% (vs. 1.2% MoM in July 2012) and annual inflation to 6.3-6.4% YoY (vs. 6.9%YoY end-June).