September saw a decline in consumer inflation to 5.9% on a year-on-year basis (a month-on-month change stood at 0.1%, a quarter-on-quarter change stood at -1.6%) mainly due to the last year’s high comparison base (a change over September 2010 stood at 2.9%). An additional factor behind the ongoing downward trend in the consumer price index (hereinafter referred to as CPI) was current year’s heavy yield (in September the CPI decreased by 0.1% excluding seasonal factor).
The effect of the aggregate demand on the inflationary developments was moderately constraining (core CPI decreased to до 8.1% on a year-on-year basis). According to the estimates made the department, deviations of real GDP from its potential level remained negative (-0.8%), curbing demand inflation.
A slowing in the annual growth rate of the CPI was driven by a decrease in the prices for raw materials for the fourth successive month(-0.9% in September, contribution to the change in the CPI 0.2 p. p.). Prices for fruit and vegetables demonstrated the largest fall(by 11.6% and by 3.2% respectively).
In September administratively regulated prices for commodities and services declined (-0.8%, -0.1 p.p. contribution to the change in the CPI) due to the largest fall in prices for sugar (-8.4% over a month). The fuel prices rose by 0.3% over a month.
As a consequence, the non-core CPI went down by 0.8% (contribution to the change in the CPI -0.3 p. p.), having declined to 3.6% on a year-on-year basis.
In spite of an increase of 0.5% in the narrow core CPI in September, the strengthening of the nominal effective exchange rate (hereinafter referred to as NEER) by 9%, which started in April, has a constraining effect on the narrow core CPI growth on a year-on-year basis (annual growth rate stands at 3.0%).
Food price increases(month-on-month change 1.1%, contribution to the core CPI 0.5 p. p.) continue to be the main contributors to the core inflation growth (month-on-month change 0.8%, contribution to the change in the CPI 0.4 p. p.)
Inflation expectations of economic entities over the coming 12 months have slightly declined from 14.5% in Q2 to 13.6% in Q3.
September saw a 1.2% rise in the producer price index (PPI), which was driven by an increase in the prices for production and distribution of electric power, gas, and water (month-on-month change 4.6%, contribution to the PPI 0.8 p.p.). The annual growth rates of PPI accelerated to 21.3% on account of the low comparison base ( September 2010 witnessed a 0.1% increase in the PPI). An insignificant slowing in economic activity curbed price rises for other components of PPI.