Page 30 - RusRPTApr19

inflation in Russia has been moderate for a month now. The low base of last year will continue pushing annual inflation in February/March, but it is unlikely to reach the lower boundary of the CBR's forecast (5.5-6%). This means that the chances of a new rate hike are extremely small. Our base case scenario: the key rate will remain unchanged until 4Q19, when – as we expect – the Central Bank may cut the rate by 25bp down to 7.5% following a slowdown in annual inflation to 4.2-4.5%.
4.2.2 PPI dynamics
The Russian producer price index rose 0.1% on the month and 9% on the year in February after a 3.3% month-on-month decrease in January, the Federal State Statistics Service said in a statement on Tuesday. In January– February, the prices fell 1.9%. In 2018, prices of industrial producers rose 11.7%, the service said earlier.
4.3 Industrial sectors and trade 4.3.1 Producers PMI
February’s service PMI data posted 55.3 in February, up from 54.9 in January, showing a faster rise in business activity across the Russian service sector, IHS Markit reported on March 5. Service providers recorded a three- month high upturn in output amid a sharp increase in new business.
The services sector fared better than the manufacturing sector that failed to pick up any momentum in February.
While the IHS Market manufacturing PMI fell to a five-month low of 50.1 in February, and just above the 50.0 no-change mark, the Russia Services Business Activity Index posted 55.3 in February, up from 54.9 in January.
"The latest expansion in business activity was strong overall and the quickest since last November," Markit commented, noting that "anecdotal evidence suggested the rise was due to the acquisition of new clients and more favourable demand conditions across the service sector."
Panellists among the service providers also stated that stronger client demand
30 RUSSIA Country Report April 2019 www.intellinews.com