Russia Outlook – Update

CPI inflation surprised the market to the downside in November. According to Rosstat, CPI inflation fell to 5.8% yoy in November from 6.1% yoy in October. The outcome was in line with our expectation but marginally lower than the Bloomberg consensus forecast (5.9% yoy). Food price inflation was 5.2% yoy in November, down from 5.7% yoy in October. Durable goods inflation slowed to 6.7% yoy from 7.0% yoy in October, while services price inflation fell to 5.3% yoy from 5.4% yoy in October.

Official core inflation (net of fruit and vegetables, but including most other food items) dropped to 6.2% yoy from 6.4% yoy. Our definition of core inflation (net of all food and energy products) also dropped, to 4.9% yoy from 5.3% yoy in October. The runrate of core inflation (on our definition) was 4.3% in November, down from 4.7% in October and the lowest in almost three years. We project headline inflation to drop to 5.6% yoy in December.