Producer prices grew by robust 0.6% in September, above market expectations (0.4% m-to-m growth). On the annual basis, the producer prices are 5.4% higher than in September 1999. Agriculture prices sustained its momentum and grew 12.9% y-to-y, construction prices are 4.3% higher than a year ago and service price growth reached 5.3%.
As usual lately, expensive oil pushed prices in refinery up by almost 8% in one month. The rest of industry had a more tranquil month: food industry prices grew 0.6% m-to-m, paper industry 0.5% and remaining sectors saw stable prices.
The PPI index for September was surprisingly high and further widened the gap between the PPI and CPI - the former stands at 5.4%, the latter at 4.1%. The development is baffling as it is not clear how economy copes with rising prices of inputs and at the same time manages to keep consumer prices inflation very subdued. We bet on a convergence on both indices but were proven wrong. For October, we believe that the PPI will maintain its momentum and will rise by about 0.5% m-to-m. However, as the last October saw even 0.7% growth m-to-m, the annual PPI should fall to 5.2%. By the end of 2000, the annual PPI should hover around the 5% level.