The higher growth in heating prices (3.2% WoW vs. 0.8% WoW a week ago) was a key CPI growth driver over the last week. We note that the growth in water supply costs also advanced in 16-22 July. Overall, we think that the acceleration in prices for some household utilities is in line with the second-round effect of the tariff increase on 1 July. This effect is set to soften in the weeks to come, we believe.
Meanwhile, fruit and vegetable prices kept deflating last week, providing additional support to our view that a good harvest this year, combined with the poor harvest last year, will push the YoY growth in food prices down in the coming months, and thereby contain headline CPI annual growth as well.
The YoY growth in headline CPI slid to 6.4% YoY as of 22 July, according to our calculations. We are keeping our forecast of full-July monthly inflation at 0.7-0.8% (vs. 1.2% MoM in July 2012) and annual inflation at 6.3-6.4% YoY (vs. 6.9% YoY end-June).