Page 29 - RUSRptSept18

At the same time, the transportation sector was up by 4% y/y compared with 2.1% y/y in June (up by 3.1% y/y in January-June).
BCS Global Markets argued on August 20 that "one has to admit that not accounting for one-off factors (working days and low base), the Russian economy is growing almost exclusively due to export industries," as indicated by growing transportation numbers. In the meantime, investment growth remains modest, and consumption is under pressure, BCS warns.
4.2 Inflation
Russia's largest creditor state-controlled bank Sberbank increased its rates for both ruble and currency deposits for the first time since 2014 . The bank holds almost half of all Russia's deposits and the move effectively raises the cost of money for Russians, amid current ruble weakening and awakened inflationary pressures .
Previously Sberbank analysts suggested that the Central Bank of Russia at its next policy meeting on September 14 could go out of its way and hike the key interest rate from current 7.25% under mounting geopolitical pressure and overall emerging market volatility .
The fall in inflation also seems to have bottomed out . Consumer price inflation (CPI) ticked up from a low of 2.2% earlier this year to 2.5% in July, but producer price index of inflation (PPI) has jumped from 5% at the start of the year to 16% in July on the back of rising oil prices.
VAT rates were increased from 18% to 20% in July and that is having an immediate impact on inflation. Moreover the ruble has lost 8% of its value in August and that will feed through into higher prices over the rest of the year, say economists.
On Bloomberg's date the Russian ruble has been among the five worst performers in emerging markets since late February 2018, losing about 17% versus the US dollar YTD. Inflation-minded CBR previously estimated that each 10% decline in the ruble’s value could add a percentage point to consumer price growth.
29 RUSSIA Country Report September 2018 www.intellinews.com