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Weekly CPI – inflation up to 6.3% YoY as of 3 March

According to Rosstat, CPI growth reached 0.11% during 1-3 March. Over the reported period, the average daily price growth jumped to 0.036% (vs. 0.027% a week ago). Component-wise, the inflation this week was broad-based, while the main contributors were onions (+3.1%), potatoes (+2.6% WoW), vodka (+1.0%) and cabbage (+3.7%).

Early March daily inflation progressed to 0.036% (pushing YoY headline CPI growth higher to 6.3% as of 3 March), the highest level since mid-July 2013, due to the pick-up in prices on eggs (0.9% WoW, after 2.5 months of deflation), slightly accelerating price gains for vodka, no deflation in heating cost and higher transportation tariffs (+0.6-0.8% for tram and trolleybus tickets). Seasonal vegetable disinflation could have helped, but the RUB sell-off has dampened a downward move leading to flat fruit and vegetable prices at 1.2% WoW over the reported period (vs. 0.3% WoW a year ago).

While vodka prices are set to normalise in the near future, as the ongoing upturn links to a second-round effect from the 1 January 2014 hike in the minimal retail price, and the upturn in the prices for eggs and transportation services seems to be one-off, stable vegetable prices might imply the pass-through becoming entrenched.

We believe that full-February headline CPI is to show an increase in annual growth to 6.5% YoY, with a monthly advance of 0.7% (given flat average daily price growth at 0.022% during the remainder of March). Overall, this is likely to be due to transitory shocks and in any case does not put the CBR’s target at risk.

Vladimir Kolychev, Daria Isakova
VTB Capital analyst

CPI, Rosstat

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