Page 38 - RusRPTDec20

demand, in the new reality, two types of issue have emerged:
i) broken seasonality in some services prices; and ii) reporting issues.
VTBC says that, to some extent, the rebound in services inflation is the result of consumer demand being not as soft in October as we might have anticipated against the backdrop of increasing coronavirus cases, as well as the rising isolation intensity ​reported​ in the largest agglomerations across Russia, especially taking into account the scale of the demand drop in 2Q20: an early physical indicator of consumer demand for October, namely passenger car sales, was more upbeat than the consensus had anticipated (+7.0% y/y vs. +0.8% y/y estimate).
At the same time, broken seasonality and reporting issues were also at play in October. For instance, tourism services prices typically fall in October in m/m terms, but Rosstat has reported them frozen for a while. This causes the seasonally adjusted tourism services inflation in October to be excessively positive. The broken seasonality factor also relates to prices at sanatoria: in October, they fell by not as much as they typically fall in m/m terms (having, in the summer, not risen by as much as they usually do). For this reason, the estimate of the seasonally adjusted sanatoria services inflation is also excessively positive.
VTBC estimates suggest that inflation in total for 2020F is to reach +4.1% y/y, close to the top of the CBR's 3.9-4.2% range for 2020.
38 ​RUSSIA Country Report​ December 2020 www.intellinews.com