Rosstat has released its regular weekly CPI report (for 29 October – 5 November). It implies that for the first five days of this month, consumer prices added 0.07% (vs. 0.08% during the same period of 2012). The average daily growth in consumer prices eased slightly to 0.014% during the reported period, from 0.016% in the last days of October.
The weekly CPI structure reveals that disinflation/stronger deflation in the prices of vegetables (especially onions and potatoes), gasoline, eggs, meat and heating bills helped inflation to abate, although this positive development was partially offset by the WoW pick-up in milk prices.
Daily inflation in consumer goods slowed in early November, which is good news as it was based on a further moderation in the growth of prices for vegetables (which started at the end of October) and eggs (the key CPI drivers over the first half of this autumn). However, milk prices, which had been slowing throughout October, unexpectedly advanced last week. We treat that as a temporary correction after the rather sharp descent in the previous week. We are retaining our view that the drop in wheat prices this summer will ultimately crystallise into lower fodder prices and, consequently, a drop in the final retail price of dairy products (similar to egg prices, that have already decelerated).
The annual growth in consumer prices nevertheless remained unchanged at 6.3% as of 5 November.
All in all, we expect food disinflation in November on softening effects of heavy rains and lags in adjusting fodder prices to wheat costs and see CPI growth of 0.3% MoM and 6.2% YoY this month. In our view, there are now more downside risks to our YE13 forecast of 5.9% YoY.