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Weekly CPI – annual inflation edges down to 7.4% as of 4 August

Rosstat reports that the weekly CPI gain was 0.03% WoW over the first four days of August, up from the negative print registered during 29-31 July. Details show that the increase in vodka (+0.9% WoW), gasoline (+0.3%) and chicken (+0.9%) prices were the key inflation drivers last week, while deflation in vegetables intensified, with WoW drops in potatoes and tomatoes of 8.1% and 7.2%, respectively.

Our View: The pace of deflation across vegetables has increased further, and since mid-July has shaved around 0.1pp from the annual headline inflation. Also, even though regulated tariffs are still on the rise, that is mostly neutral for the headline CPI in YoY terms.

In contrast, prices on vodka jumped last week, reflecting the 11% hike in the minimum retail price from 1 August (to RUB 440/l from RUB 398/l). This is the second time that minimum vodka prices have been increased this year (the first time was on 11 March and was equal to 17%). Thus, while in March the greater rise in alcohol prices spurred headline inflation 0.05pp, this month we might see a milder inflationary effect (over 1-4 August it reached 0.02pp).

Looking ahead, the robust harvest outlook both locally and globally implies continued disinflation, but the outlook is subject to elevated uncertainty in light of the latest extension in trade restrictions.

Daria Isakova, Vladimir Kolychev
VTB Capital analyst


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