Russia had inflation of 0.6% in July, 8.1% since start of 2009
MOSCOW. Aug 4 (Interfax) - Russia posted inflation of 0.6% in July 2009 compared to 0.5% in July 2008, the Federal State Statistics Service (Rosstat) said on Tuesday.
Inflation also totaled 0.6% in June 2009.
July marked the first month since March that inflation was higher than it was in the same month of last year. The higher inflation was the result of an increase in the cost of gasoline as well as fruits and vegetables in addition to growth in tariffs for gas in the utilities sector and in passenger travel.
Consumer prices increased 8.1% in January-July 2009, or 1.2 percentage points less than the 9.3% inflation seen in the first seven months of last year.
Inflation was 12% from the period from July 2008 to July 2009 compared to 11.9% in annual terms in June.
The final inflation figures for July coincided with Rosstat's preliminary estimates of last week.
The rise in inflation in July slightly exceeded the 0.5% forecast analysts had anticipated in a consensus compiled by Interfax.
The main factor impacting food prices in July was a 3.2% rise in the cost of fruits and vegetables, which was mainly a result of products from the new harvest coming onto the market. The opposite trend was seen in July 2008, when fruit and vegetable prices fell 6.7%, leading to a sharp slowdown in inflation. Potatoes saw the biggest price increase in July 2009, rising 13.1%.
Gasoline prices also increased considerably for the second month in a row, growing 7.1% following an 8.8% rise in June.
Food prices grew 0.6% in Russia in July 2009 following growth of 0.5% in June 2009. Excluding fruit and vegetables, food prices rose only 0.2% in July versus 0.1% in June. Nonfood prices increased 0.6% in July 2009 following an increase of 0.8% in June.
The cost of paid services rose 0.8% in July compared to 0.5% in June. Tariffs on gas supplies in the utilities sector rose 4.1% last month, while tariffs on passenger transportation increased 1.8%. Seven regions and territories in Russia saw consumer prices rise 1.0% or more in July. The biggest increase in prices and tariffs was in the Chukotka autonomous region, where prices rose 3.2% on average, including an increase of 6.7% for food. Moscow saw inflation of 0.8% in July and 8.9% since the start of 2009, while St. Petersburg had inflation of 0.6% and 8.5%, respectively.
The core consumer price index, which excludes short-term fluctuations from various seasonal factors and one-off events, was 100.3% in July and 106.3% in the first seven months of the year (compared with 100.8% in July 2008 and 107.6% in January-July 2008).
The Economic Development Ministry's revised forecast is for inflation of 12%-12.5% in 2009. Analysts told Interfax in a consensus forecast at the end of July that inflation this year will equal 11.3%.
Russia had 13.3% inflation in 2008, the highest yearly rate since the 15.1% recorded in 2002.
Analysts polled by Interfax reacted positively to the results for July. They said this year's weather has led to an earlier start to the harvest and canceled out the seasonal factor with a decline in fruit and vegetable prices. Lower consumer demand will contribute to a decline in annual inflation rates in the coming months and deflation could even be seen in August and September due to seasonal factors, they said.
"Fruit and vegetable prices are highly dependent on weather and the harvest. The seasonal factor came into play earlier last year. Usually, the seasonal slowdown occurs in August or September," Merrill Lynch chief economist Yulia Tseplayeva said.
When such a decline in demand is seen in countries with strong institutions and developed competition, there would not be any concerns about double-figure inflation or a desire to reduce it to single figures. On the contrary, possible deflation would be the top concern, she said. "Foreign investors are always surprised how inflation figures can be so high with such a tightening of demand," she said.
Tseplayeva predicted that inflation will continue to slow in annual terms until the end of the year and could even drop down to 9% in December compared to December 2008.
Troika Dialog analyst Anton Struchenevsky said the fact that last month's inflation exceeded that of July 2008 "does not cause serious fears. Fruit and vegetable prices are a specific indicator that should be focused on for a longer period - from June to September. If it is excluded for July, inflation slowed down in all other areas," he said.
Prices have increased 0.6% in the past three months, a trend that would lead to "a positive figure" of 7.5% for the whole year, he said.
Inflation will slow even further in August and Russia could see deflation, he said. Struchenevsky said he expects inflation to amount to 10.5% in 2009.
High inflation risks will arise in 2010 due to the large budget deficit, he said.