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pinch of salt, as it simply reflects the level shift from the revised data back to estimates based on the preliminary information," VTB Capital argued on July 17.
Sberbank also believes that currently the manufacturing data is in methodological transition and is unreliable for long-term conclusions. The bank "continues to expect an increase in oil production, while the turnaround in the construction sector will provide additional support for industrial production in 2H18."
4.2 Inflation 4.2.1 CPI dynamics
Despite the Central Bank of Russia (CBR) warning of rising inflation in the rest of the year following the government’s decision to increase VAT, inflation fell modestly in June to set a new post-Soviet record low of 2.3% y/y, Rosstat reported on June 9.
It’s summer when most Russians move to the dacha and work in the garden. The modest decline in Russian inflation in June, to 2.3% y/y, was mainly a result of a sharp fall in fruit and vegetable inflation. And while headline inflation is still weak, there were some tentative signs in the data that broader price pressures may be starting to build.
“Last month’s figure was lower than May’s outturn of 2.4% y/y but slightly higher than the Bloomberg consensus forecast of 2.2% y/y,” Capital Economics said in a note. “The big picture is that inflation has now hovered at rates of 2.2-2.5% y/y for eight months, well below the central bank’s 4% inflation target.”
The breakdown of the data showed that the decline in the headline rate between May and June was a result of lower food inflation – something that happens every year. Food prices fell by 0.2% y/y last month, having risen by 0.4% y/y in May.
16 RUSSIA Country Report August 2018 www.intellinews.com