According to Rosstat, CPI growth reached 0.26% during 1-10 February. Over the reported period, the average daily price growth continued edging up and reached 0.027%, the highest level since early July 2013 (a time point of hikes in regulated tariffs).
The driving forces behind CPI growth this week were more broad-based, but the key elements were almost the same (in order of importance): potatoes (+3.8% WoW), onions (+3.9%), vodka (+1.2%) and cabbage (+4.2%).
February tends to bring a slowdown in fruit and vegetable inflation, but this year has turned out to be in complete contrast to the usual pattern.
In particular, the weekly growth in potato prices hit the highest level since late June and added around one third to the weekly CPI increase (0.06pp out of 0.19%). One could blame the recent RUB weakness for the jump in potato prices, but we have doubts about how important this trigger actually was, given the small share of imported potatoes (less than 3% in regular periods; in 2011, when there was a severe drought, imports reached a record 1.4mnt vs. 21.1mnt produced locally). In addition, the local potato harvest was 2.6% lower than a year ago, so the paucity of reserves could have spurred speculation on the market. All in all, RUB normalisation and the temporary nature of any speculation implies that potato inflation is to slow down soon.
That said, the upward moves in dairy, sugar, onion and cabbage prices were also a disappointment.
As a result, while daily inflation decelerated in mid-February 2013, this year it is crawling up. So the recent reading implies that headline CPI has returned to 6.1% YoY as of 10 February after a short downturn to the 6.0%-mark in early February.
We estimate the full February reading at 0.6% MoM and 6.1% YoY under a base case of vegetable prices normalising and at 0.7% MoM and 6.2% YoY under stress-test, which implies a gradual acceleration in vegetable prices growth.