Consumer prices increased by 1.6% y/y in September, inching up from 1.5% y/y increase in August and matching market consensus, the stats office reported on Friday. Core inflation also accelerated by 0.1pp m/m to 2.3% y/y in September, thus matching consensus estimates.
The consumer price inflation acceleration in September was solely driven by food prices, the increase of which speeded up markedly to 5.3% y/y in the month from 4.4% y/y in August. The reported acceleration was mainly on the back of higher prices of oils and fats (up by 4% m/m), of milk, cheese and eggs (up by 1.6% m/m), fish (up by 0.8% m/m), vegetables (up by 0.7% m/m). By contrast, prices of fruit were down by 1.3% m/m. Thus, according to our calculations food prices contributed some 0.17pps to the headline inflation acceleration in the month. At the same time, transport, housing, furnishings and alcoholic beverages prices had a 0.07pps negative contribution to the headline inflation change in the month. In particular, transport prices increased by slower pace of 3.2% y/y in September (3.5% y/y growth in August), while the decrease of housing prices deepened to 1.2% y/y in the month and that of furnishings – to 0.4% y/y. Still, food and transport prices continued driving inflation up in the month, while housing prices prevented stronger inflation. Overall, food prices are likely to continue driving inflation up this year mainly to reflect low base effects as well as the expected to be by 20-30% weaker harvest this year, while transport prices are to gradually ease due to the exhaustion of the low oil prices base effects.
Net inflation decelerated to 1.5% y/y in September from 1.6% y/y in August, while food prices grew at much stronger rate of 5.3% y/y in the month, up from 4.7% y/y in August – these developments resulted into core inflation acceleration to 2.3% y/y in the month. The core inflation remains strong, thus indicating that the domestic economy continues producing inflationary pressures. Regulated prices continued falling for a fourth year with their fall stagnating at 1.5% y/y in September.
Going forward, the increasing qualified labor shortage amid narrowing labor market will increase pressures on companies to raise wages in order to retain their current or attract new qualified workers, thus creating upward cost-push price pressures. Note that the average nominal wage in the economy increased by 5.3% y/y in August with wages in industry growing by the robust 5.9% y/y in the month. Although inflation has been accelerating, thus trimming real wage growth, the latter remains quite robust and supportive of robust household consumption going forward, and respectively, of further demand-pull inflationary pressures. The NBS projects consumer prices to increase by 1.3% on average this year.