Page 30 - RUSRptSept18

4.2.1 CPI dynamics
Russia’s annual inflation as of August 27 inched to 3% for the first time since September 2017. Recent sanction-induced ruble weakening as well as other factors such as lower harvest expectations and the VAT rate hike have awakened inflationary risks after the Central Bank of Russia managed to bring price growth to post-Soviet record lows. Russian (CPI) ticked up to 2.5% in July , just below the consensus forecast of 2.6%, but is expected to continue to rise to the long-term trend level of 4% over the next year, the CBR said on August 6.
However, domestic analysts already suggested that emerging market volatility and looming US sanction threat might force the CBR to reconsider its previous guidance and hike the key interest rate from current 7.25% in September to curb potentially higher-than-expected inflation. Most recently the Ministry of Economic Development already said that it will revise the full-year inflation forecast from previous 3.1% due to recent developments.
Food inflation is back from the red, up +0.5% YoY after -0.2% YoY in June. The largest contribution came from fruit and vegetables, which went from -9.8% YoY to -6.7% YoY. The turnaround would have been even more pronounced were it not for sugar prices, which lapsed from -6.9% YoY to -12.7% YoY.
Non-food inflation is roughly flat at +3.8% YoY on the back of the government-brokered pause in the growth of gasoline prices. The price growth in this category is down to +11.8% YoY, from +12.7% YoY a month ago.
Services inflation is down to +3.8% YoY, after +4.1% YoY in June. The main driving force behind the decline is lower housing and utilities inflation, which is down to +3.8% YoY from +4.4% YoY.
4.2.2 PPI dynamics
Russia’s producer price index of inflation (PPI) has risen fast in the last few months on the back of rising oil costs and wage inflation to reach double digits.
PPI was 16% in July , slightly down from the 16.1% in June, but well up on the 5% it started the year at, reports Rosstat.
The recent devaluation of the ruble in the last few months caused by a combination of the Turkish lira crisis and fears of new “crushing” sanctions
30 RUSSIA Country Report September 2018 www.intellinews.com