Inflation accelerated but with no surprise

RUSSIA ECONOMICS - In Brief 09 Jul 2020 by Alexander Kudrin

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Rosstat announced that in June inflation accelerated to 3.2% y-o-y, as it reached 0.2% m-o-m. This acceleration looks moderate, as retail sales seemingly started to recover as of lockdown restrictions have been eased. Note that in June 2019, monthly inflation was at zero. It was rather unusual for that month, as normally, monthly inflation can be recorded not higher than zero in August-September, which is the peak of the harvesting season. Last year, Russia saw fast disinflation, and from June to October, cumulative inflation was zero.This year, inflation reached 0.3% w-o-w in early July, but yet it won’t be a sign of rising inflationary pressure, which could revert the CBR easing policy immediately. Inflation w-o-w accelerated on the back of indexation of regulated tariffs, such as on heating, water supply, gas, transport, electric energy, which is largely a one-off effect. In some regions, however, these tariffs may have not yet been raised, so that they will be adjusted over the week to follow.Meanwhile, w-o-w deflation was already recorded for some food products. Deflation on various segments of the food market is to continue. According to zol.ru, which is an online platform that monitors grain and some other agricultural product markets, at the start of the harvesting season crop yields were good, and by July 8, Russia already collected 15.3 mln tons of grain. The bulk of it will be collected in August and in early September, and the total harvest in 2020 is currently expected to be over 120 mln tons. However, it is subject to weather conditions.Some acceleration of inflation was expected – at least due to low base effect in 2019. Meanwhile, the current trajectory...