CPI growth reached 0.64% during the first 21 days of April, while the average daily price growth remained near 0.03% for the seventh week in a row.
Component-wise, inflation last week was led by i) non-reported items (perhaps, pork and car prices) and ii) some reported items, with the largest contributions from cabbage (+5.7% WoW), potatoes (+1.2%), gasoline (+0.2%) and chicken (+0.3%).
Current inflation risks are concentrated in certain food components, along with imported goods.
For now, the biggest risk is pork: the ban on EU imports has already pushed wholesale pork prices up 30-40% YTD and that is now filtering through into retail prices. We estimate it might add 0.3-0.5pp to the headline CPI in the coming months.
Meanwhile, following several weeks of moderation, price gains across fruit and vegetables increased again (mainly on cabbage and potatoes) last week, but remains milder than in 2013, implying downward pressure on annual inflation.
Also, chicken prices added 0.3% WoW, the strongest pace since late October 2010. That could be linked to the recent pickup in global wheat prices and pork inflation (as a substitute product).
On a positive front, dairy inflation started to dissipate in line with our expectations that the impact from the shock on the dairy market has already peaked. We remain cautious, however, concerning dairy prices and wait for more evidence of normalisation.
Our thinking concerning the full-month increase in consumer prices is that it could reach 0.8%, which would likely translate into 7.3% in YoY terms (vs. 7.2% YoY as of 21 April). Beyond April, we anticipate headline CPI peaking in May-June on the FX pass-through, pork inflation and significant disinflation into 2H14, although idiosyncratic shocks in dairy and pork categories pose upside risks to our year-end forecast (4.5% YoY).