Deflationary Pressures To Remain, Short-Term

Price pressures remained very subdued in May, with the consumer price index registering a fifth consecutive y-o-y decline at -3.3%, the sharpest fall since the Commerce Ministry started collating monthly price statistics in 1976. In month-on-month terms, CPI fell by 0.3%, slightly gentler than the 1.0% registered in April. Perhaps more importantly, however, the targeted 'core' measure of inflation - which strips out fuel and raw food - dipped into negative territory in May too, at -0.3% y-o-y. Although the deceleration was shaper than consensus forecasts it does not come as a complete surprise, particularly in view of the poor first quarter GDP number, which showed a massive 7.1% y-o-y contraction.

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