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November figures give food for thought on inflation

Yesterday, the full-month CPI report for November was published. Headline CPI accelerated to 6.5% YoY, from 6.3% YoY in October, surpassing both our expectations (6.4%) and the Bloomberg consensus (6.4%). The faster annual growth in consumer prices came mostly on the back of a pick-up in food prices, in particular vegetables and eggs (which added 39% YoY in November vs. 29% YoY the month before). Tariffs have also added to the uptick in the pace of headline CPI: passenger transportation services added 8.8% YoY vs. 7.5% YoY in October. Meanwhile, non-food prices remained at 4.5% YoY, a three-year low. Rosstat’s core inflation edged up to 5.6% YoY vs. 5.5% in October.
Headline CPI surprised on the upside in November, flagging that there is almost no chance of the CBR’s inflation target range for this year being hit. The pickup in food inflation was once again to blame, while underlying core inflation remained well-behaved, at 4.5% YoY. The disinflation trend in core CPI took a pause on the delayed pass-through from a weaker RUB and (presumably) the second-round effects of tariff indexation, although the magnitude looks muted. We expect disinflation to resume and then strengthen significantly into the next year on a convergence between core and non-core items, as well as the bleak cyclical picture. Policy-wise, however, elevated headline CPI might delay rate cuts further into 2014.
Vladimir Kolychev, Daria Isakova
VTB Capital analyst

CPI, CBR, ruble, inflation

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