Page 32 - RusRPTNov18

analysts by front-loading the monetary policy rate with preventive 25bp hike to 7.5%.
In autumn Russian retail prices for sugar jumped by over 50% in some federal districts, RBC business portal said on October 26 citing the materials of the Ministry of Agriculture. As of the beginning of 2018, the price in some districts rose by 44%. Inflationary pressures from main commodities and gasoline is in focus, as the Central Bank of Russia is ready to further tighten the monetary policy should price growth spin out of control . The price rise is due to the low harvest of sugar beets in the Krasnodar region. In the ongoing agricultural season the output of sugar is expected to be at 5.8mn tonnes, not covering the forecasted demand of 6.1mn. However, sharp deficit is likely to be avoided given about 0.2mn tonnes of sugar in stocks from last year and about 0.3mn tonnes of imports. So far this year the retail prices for sugar rose 17.6% year-to-date and 5% year-on-year as of October 2018.
4.2.2 PPI dynamics
The notable development in June was the increase in the producer price index that spiked to 16.1% y/y from a years worth of single digits, a pace unseen since 2015. This uptick was driven by the rise in oil prices, as prices of oil-linked goods made up 11pp of the headline growth, according to bankers. .
Ruble-denominated oil prices started to add more visibly in April, with +45.4% y/y, while in June they surged +74.5% y/y. Given that gasoline makes up 4% of the consumer basket, and taking into account the retail price structure, bankers estimated the total effect on consumer inflation in May at about +0.5pp.
However, the basket structures of CPI and PPI are completely different. While, for CPI, Rosstat applies the consumption structure, in the case of PPI, it uses the amount of goods produced. Given this, in a sense the PPI basket is closer to that for IP, with the weight of oil-linked industries in the basket close to 28%. It implies the contribution of oil-triggered inflation at about 11pp out of the +16.1% y/y total growth.
32 RUSSIA Country Report November 2018 www.intellinews.com