Page 40 - RusRPTJun21

4.2.1 CPI dynamics
According to Rosstat’s data released on 7 May, consumer prices added 0.58% m/m after adding 0.66% m/m in March, bringing headline inflation to 5.53% y/y in April vs. 5.79% y/y in March. This appeared to be an inch down vs. consensus (Bloomberg consensus was 5.6% y/y).
Importantly, core CPI, which is a better gauge of inflation processes (excluding the most volatile components), continued to rise, reaching 5.47% y/y in April vs. 5.38% y/y in March.
The main drag was fruits and vegetables (4.75% y/y in April vs. 11.87% y/y in March) due to the high base effects of the first months of COVID-19 in 2020. At the same time, other food items decelerated marginally to 6.77% y/y in April vs. 6.98% y/y in March.
Elsewhere, non-food items continued to accelerate, reaching 6.16% y/y in April vs. 6.6% y/y in March due to gasoline and rising prices for construction materials. In the services segment, the growth in prices remained subdued, adding only 3.3% y/y vs. 3.2% y/y in March.
While consumer inflation started to moderate in April on the back of higher base effects, the weekly data at the beginning of May show that inflation processes still remain elevated, with the weekly print persistently holding at 0.2% w/w.
“Our SAAR gauges of inflation point to consumer price growth being far above the target for many components at 6.3% m/m SAAR overall (vs. 6.6% in March), with food prices at 6.3% m/m SAAR (vs. 5.8% in March) and non-food prices wobbling at 7.7% m/m SAAR. Services are the only sector that returned to the 4% target (4.2% m/m SAAR vs. 6.3% in March and 5.7% in February),” Sova Capital said in note.
As the low base effects and food inflation shocks pass, the main drivers for the y/y headline should shift from food components to non-food items and services, say analysts.
“The main reasons for the pickup in such prices could be the pass-through of higher costs from producers to consumers due to the weaker FX rate, which could be amplified by supply-demand mismatches after COVID-19 disrupted supply chains. We already see these disruptions in the emerging deficits seen for low-end computers, bicycles and cars,” Sova Capital said.
“At the same time, supply disruptions are keeping global food prices high. The April FAO data pointed to a persistent rise in food prices (+30% y/y in April). While cereals and dairy prices rose 25% y/y in April, oil prices grew nearly 100% y/y last month and sugar prices were up 58% y/y. As the ruble depreciated significantly in 2020, y/y growth rates in ruble terms remain elevated, but they have not exhibited such steep increases. As a result, this could interfere with the potential gradual y/y decline in the food component and additional government measures (e.g. limiting buckwheat exports). For the rest
40 RUSSIA Country Report June 2021 www.intellinews.com