MAYOR: the deceleration of inflation in July was higher than expected due to lower prices for vegetables

MOSCOW, August 9. /TASS/. The Ministry of economic development expects by the end of August a monthly deflation on the consumer market at the level of 0.3-0.5%, which will slow down annual inflation to 3.3 and 3.6%. This follows from the report of the Ministry, “the Inflationary picture in July of 2017”.

“At the end of August we expect to see deflation in the consumer market at the level of 0.3-0.5% month-on-month, which will slow down annual inflation to 3.3 and 3.6%”, – stated in the message.

The MAYOR noted that July inflation amounted to 3.9% yoy, which is below the target level the Bank of Russia. This slowdown in annual inflation was primarily due to a significant decline in prices for fruits and vegetables with early arrivals of the new crop (-8,3% month-on-month in July, which compensated for the rise in prices in the previous month, during the week 1 to 7 August decline in prices for fruit and vegetables amounted to 3.9%).

In the Ministry added that the potential to reduce fruit and vegetable prices in the coming months has not been exhausted and is about 15%. Such a reduction can make to the accumulated inflation additional contribution in the amount of about -0,6 p. p. in August – September 2017.

Another factor in the decline of annual inflation, according to estimates by the MAYOR, was smaller than last year growth of prices for communal services (if the same as last year, the regulatory prescribed level of indexation of tariffs by 4%). This year in July, prices of utilities rose 4.4% month-on-month (compared with 5.1% month-to-month in the previous year). The contribution of rising prices for housing and communal services as a whole in July this year amounted to +0.3 percentage points compared to +0.4 percentage points a year earlier.