Page 28 - RusRPTJan22

4.2.1 CPI dynamics
Rosstat released its consumer price data for November on 8 December. CPI reached a five-year high of 8.40% y/y in November vs. 8.13% in October, coming in ahead of consensus (8.35%).
Core CPI was at 8.7% y/y in November vs. 8% y/y in October, ahead of consensus. The services sector appeared to be the primary driver of the acceleration, with prices up 5.15% y/y vs. 4.36% y/y in October. Global bottlenecks weighed on outbound tourism ahead of New Year (12.29% y/y in November vs. 2.96% y/y in October).
Food prices saw a marginal deceleration (10.81% y/y in November vs. 10.89% y/y in October) due to diverging trends for fruits and other food items. Fruits and vegetables showed some signs of stabilization after issues with harvests were resolved (19.4% y/y in November vs. 25.6% y/y in October). At the same time, other food items saw faster price increases (9.83% y/y in November vs. 9.25% y/y in October), such as meat and poultry, butter, bread and bakery products, and grains. Non-food items also saw a y/y growth in the headline rate (8.32% y/y in November vs. 9.17% y/y in October) due primarily to gasoline and coal prices. We also note higher prices for electronics and medicines, while price pressures in materials continued to fade.
The weekly data for the week ending Monday, 6 December, saw a sharp fall from 0.465% w/w to 0.07% w/w, bringing the y/y headline rate to 8.28% y/y and suggesting more price decreases in the basket for the third week in a row.
In November, price pressures again strayed farther from CBR’s target CPI of 4%. However, unlike in October, the m/m SAAR rate pointed to an overall deceleration (10.1% m/m SAAR in November vs. 13.3% m/m SAAR in October), although strong pressures in the core segment remain (12.9% m/m SAAR in November vs. 9.82% m/m SAAR in October). If we exclude outbound tourism’s impact on headline CPI, we get a rate of 8.2% y/y and 8.5% m/m SAAR.
Going forward, we could see fewer pressures in the food segment, i.e. wholesale pork prices fell below 2020 averages due to seasonality and greater supply. This could also affect other meat products after the cancellation of import tariffs on meat. However, we believe poor harvest conditions could still affect storage capacities for fruits and vegetables and be inflationary. Elsewhere, semiconductor shortages are likely to push car prices up once local producers resume operations. We expect CPI to be 8.2% y/y at YE21 and 5.1% at YE22.
On a separate note, comments from CBR Deputy Head Alexey Zabotkin to Interfax yesterday, CBR Governor Elvira Nabiullina and President Vladimir Putin suggest that the key rate could rise further to curb the second-round effects from elevated inflation expectations. We therefore expect CBR to hike the key rate 100bps on Friday, 17 December.
28 RUSSIA Country Report January 2022 www.intellinews.com