13 Jan 2010 16:53

Russian inflation accelerates to 0.7% in Jan 1-11

MOSCOW. Jan 13 (Interfax) - Russian inflation accelerated to 0.7% in the period January 1-11, driven by higher fruit sand vegetable prices, the Federal State Statistics Service (Rosstat) said.

Consumer prices grew 0.8% in the first 11 days of 2009 and 2.4% in January 2009 as a whole. Central Bank First Deputy Chairman Alexei Ulyukayev said in December that he thought inflation in January 2010 would be 1.5% or below.

Inflation was 0.4% in December 2009 and 8.8% in 2009 as a whole - the lowest that post-Soviet Russia has seen.

Inflation usually speeds up in the month of January due to higher government spending in December and tariff hikes that take effect on January 1. However service charges are only included in monthly, not weekly inflation estimates.

A 2.6%-surge in fruit and vegetable prices fuelled inflation in the first third of January. Cabbages went up 6.1% and onion and carrots rose 4.8% and 3.5% in price, respectively.

There were also price rises of 1.4% for granulated sugar, 1.1% for vodka (due to the introduction on January 1 of a minimum retail price of 89 rubles per half liter), 0.8% for cheese and 0.4%-0.5% for milk, smetana and butter.

However there were price decreases of 0.2%-0.3% for chickens, wheat flour and vermicelli pasta, 0.5% for gasoline and 0.2% for diesel.

Bread, beef and sunflower oil hardly altered in price.

Analysts told Interfax in a consensus-forecast at the end of December that they thought Russia would have 8.4% inflation in 2010, which is above the government's official forecast of 6.5%-6.7%.

Analysts told Interfax they were unfazed by the New Year surge in inflation. This usually happens and it does not necessarily mean inflation will accelerate in the year as a whole.

"Inflation is always higher at the start of a year. The government spending growth at the end of the previous year, the year-end bonuses and tariff hikes at the start of the New Year are one thing. Add to that the long holidays and you get a disproportion between demand and supply, when a lot of people are off work and demand soars," Troika Dialog analyst Anton Struchenevsky said.

Struchenevsky also said the cold weather had contributed to the price increases for fruit and vegetables as storing these becomes more difficult.

"January and February are the most inflationary months, and I'd not ring the alarm bells just yet. There are no grounds for inflation to rise in the year as a whole - government spending won't grow, and there's no devaluation factor. I wouldn't be surprised if the Central Bank lowers the refinancing rate again at the end of the month," Struchenevsky said.

UralSib chief economist Vladimir Tikhomirov said the early January price surge was "not catastrophic" and that judgment ought to be left until the end of the month.

"January is a particular month. It is now that the money allocated to the public sector at the end of the year is being paid. Also, many companies procure goods and services at new prices from January 1," he said.