Page 46 - RusRPTApr21

4.2.2 PPI dynamics
The February PPI print added +10.7% y/y, surprising the Bloomberg consensus of +8.9% y/y.
Typically, PPI growth has closely matched the oil price converted to the local currency (due to the prominent share of the added value and the high volatility of this component), and recently metals have been key, for both the mining & quarrying component (metal ores) and manufacturing (basic metals production).
This pattern is hardly new, as metals supported headline PPI throughout 2019 and onwards, as their prices proved more resilient than those of oil.
After incorporating item-level numbers for metals into our PPI projections, the spillover into consumer price growth is limited: after accounting for the new numbers, we reiterate our projections of YE21F CPI of +(4.5-4.8)% y/y.
Producer prices have been accelerating since August. The latest print is no exception: in February, the PPI grew +10.7% y/y vs .+6.7% y/y in January and +3.6% y/y in December.
However, unlike earlier periods (i.e. between July 2019 and July 2020), when the PPI growth was predominantly driven by petroleum prices (both crude oil and petroleum products within manufacturing), since August metals have largely been behind the growth of the PPI in manufacturing.
A similar pattern has been observed in the seasonally adjusted PPI: in February, the PPI was up +3.4% MoM SA, according to our estimates, of which manufacturing contributed roughly +2pp.
The decomposition of the seasonally adjusted prices growth within manufacturing suggests that, out of February's +3.0% MoM SA, +2.2pp can be attributed to petroleum products and metals.
Food inflation, according to our estimates, was up +1.9% MoM SA, and although it remained elevated, it did not stand out compared with the latest prints.
The prices of basic metals within manufacturing closely follow those of metal ores within mining & quarrying, while the latter is in line with the global metal prices rebounding after the coronavirus-induced slump.
46 RUSSIA Country Report April 2021 www.intellinews.com