Rosstat has released its weekly CPI report for 23-29 July. It suggests that during the first 29 days of July, consumer prices added 0.82% (vs. 1.23% in the respective period of 2012). The average daily growth in consumer prices declined to 0.009% on 23-29 July, from 0.005% on 16-22 July.
The higher growth in heating prices (0.8% WoW vs. 3.2% WoW a week ago) was a key CPI growth driver over the last week, although the impact was much smaller vs. last week. 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 further in the weeks to come, we believe. The only worry concerning inflation dynamics is gasoline prices, where growth accelerated last week to 0.5%. This comes as a result of growth in wholesale prices triggered by the increase of Brent prices above RUB 3,500/bbl vs. the RUB 3,200-3,300/bbl range in May-June. As RUB oil prices have stabilised recently, and we expect them to decline during the autumn, we do not expect the increase in gasoline prices to be strong enough to have a meaningful effect on headline CPI dynamics.
Meanwhile, fruit and vegetable prices continued to deflate 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. We expect disinflation in grain-related goods to accelerate.
The YoY growth in headline CPI remained at 6.4% YoY as of 29 July, according to our calculations. We are narrowing our forecast of full-July monthly inflation at 0.8% (vs. 1.2% MoM in July 2012) and annual inflation at 6.4% YoY (vs. 6.9% YoY end-June).