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Weekly CPI – up 0.16% WoW – food disinflation fading


Yesterday Rosstat published weekly inflation at 0.2% for 25-31 August. Due to the lower base in the comparable period last year, headline inflation edged higher and now stands at 15.7% YoY, up from 15.6% a week ago. The average daily price growth for August has also edged higher, reaching 0.009% after 0.005% in the previous report. Seasonal deflation in fruit and vegetables is gradually fading away. Onions and carrots are still experiencing solid supply – prices are down 6.5% and 6.4% respectively, while cucumbers added 4.3% in price WoW and are thus the main contributors to weekly inflation. Sunflower oil, sugar and eggs are pushing the price index higher again, with prices up 1%, 0.5% and 0.4% accordingly.

In line with our expectations, the report marks a diminishment in the seasonal factor in fruit and vegetables, which is no longer outweighing inflation in other components. Hence, cucumbers’ upward price move of 4.3% WoW from a 0.6% decline a week ago suggests we could see the grocery bill adding pressure to headline inflation somewhat in the coming weeks.

Another factor, exchange rate volatility, is not helping either. However, we think that the main pass-through effect from RUB weakness will appear in the data in the coming weeks. Overall we expect an additional 1.3-2.0pp in headline inflation due to local currency depreciation by the YE printing 11.8-12.5% YoY in Dec-15. 

We also stick to our call that the CBR will keep the key rate at 11% at the BoD meeting next Friday on the basis of weak consumer demand as shown by stagnant nominal wage growth and retail sales.

Petr Grishin, Alexander Isakov
VTB Capital analysts


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