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- Price with a question: inflation in Russia has acquired the effect of a "Chinese box"
Price with a question: inflation in Russia has acquired the effect of a "Chinese box"
Prices in Russia are both declining and rising. The summer harvest has sharply reduced the price of vegetables and dragged the general statistics into deflation, but gasoline, groceries, clothing, appliances and medicines continue to rise in price. The CMACP compared such multidirectional dynamics with the "Chinese box": behind one indicator there are many contradictory processes. According to analysts, the trend will reverse in the fall — the seasonal effect will be exhausted, and the ruble will weaken. Why personal inflation is higher than the official one and whether the Central Bank will take a pause in lowering the rate — in the Izvestia article.
Where are prices moving?
Prices in Russia have gone in different directions — some goods have noticeably fallen in price, while others have continued to add value. Because of this, the general statistics show deflation in August, although in many categories, growth, on the contrary, is accelerating. This picture was formed following the monitoring of the Center for Macroeconomic Analysis and Short-term Forecasting (CMAKP), which was prepared by Dmitry Belousov, the organization's deputy director General. Izvestia has reviewed the document.
In the last three weeks of August, consumer prices decreased by 0.2% after deflation by 0.04% in the same previous period. This is a normal seasonal trend for the end of summer, the review notes. However, for the whole month, goods and services fell in price by only 0.08%, compared with a decrease of 0.4% a year ago. And in September, the trend has already turned around: prices have increased by 0.05% since the beginning of the month, and by 4.7% since the beginning of the year, according to Rosstat data.
The CMACP compared this situation to a "Chinese box." This is the name of a complex phenomenon, inside which, like in a box with many compartments, new levels, details and contradictions are hidden. In the case of inflation, several multidirectional processes are hidden behind one common indicator. Therefore, it is not easy to understand whether prices are actually slowing down or gaining momentum again, the author of the review noted.
The main compartment of this "box" is vegetables and fruits. In August, they immediately fell in price by 6.9%, calculated by CMAKP. The market turned out to be full of seasonal products: potatoes lost 13% in price over the last three weeks of the month, carrots — 11%. The only exception was cucumbers, which rose in price by 3%: the maximum supply period is probably over.
It was the vegetables that pulled the overall score down. Without taking them into account, food in August, on the contrary, rose in price by 0.54%, the monitoring says. The increase affected meat and poultry, bread, pasta and eggs. Sugar and salt also increased in price due to seasonal demand for household products, the CMACP explained.
Another compartment of the "box" is fuel. Gasoline prices rose by 2.3% in three weeks after falling by 1.1% in the previous period. The center attributed the jump to high seasonal demand, refinery repairs and an unplanned reduction in supply. At the same time, diesel, on the contrary, fell in price by almost 0.5%.
The CMACP attributes this difference to government measures to stabilize the fuel market. It is especially important to keep down the cost of diesel during agricultural work: it is used by farmers, cargo carriers, as well as some river and sea transport. According to the center, this helped to prevent a stronger transfer of fuel costs to final prices through the cost of delivery. In autumn, the pressure should ease following a seasonal decline in demand for petroleum products, they expect.
But there is also a new threat. Non-food products excluding fuel and cigarettes rose in price by 0.6% in August. The growth spanned clothing, household appliances, electronics, and medicines. The CMACP attributes this to high consumer demand, which is supported by salaries and social benefits. The increase partially offset the decrease in the cost of services after the end of the holiday season.
Izvestia sent a request to the Ministry of Energy and the Bank of Russia.
What is the real inflation rate in Russia?
Two processes are currently masking each other, says Andrey Glushkin, managing partner of the Main Division and member of the General Council of Delovaya Rossiya. The first is the usual seasonal price reduction after harvesting a new crop. It does not in itself say anything about the general trend. The second is the dynamics of the stable part of the consumer basket: products without vegetables, non—food products and fuel. It shows whether demand is cooling. So far, the picture is alarming: non-food products without petroleum products are rising in price by 3.6% year-on-year, and food prices are rising. According to the expert, demand remains high even at the key rate of 14%.
At the same time, core inflation, adjusted for seasonal and one-time spikes, decreased to about 5% in annual terms in August, Andrei Glushkin noted.
However, the official figures do not always match the feelings of customers, said Natalia Milchakova, a leading analyst at Freedom Global. Each family has its own cost structure, and carrots, cabbage, potatoes, beets and other cheaper seasonal vegetables may occupy a smaller share in it than in the Rosstat basket. Therefore, personal inflation, in her estimation, is often 2-2.5 times higher than the official one.
For the Central Bank, the most important thing is the stable components of inflation and the expectations of citizens, added Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam. In August, population estimates dropped from 14.7% to 13.7%, but still remain high. Rising prices for gasoline and non-food products may hinder further improvement of expectations, the expert believes.
What will happen to the key rate
The fourth quarter will be the moment of truth for prices, according to the CMAKP. In late autumn, vegetables will seasonally rise in price, and the ruble may weaken. It is the combination of these factors that will determine the outcome of the year. The center expects inflation at 6.5–6.8%, within the range of the Central Bank's forecast of 6-7%. By September 7, annual inflation had slowed to 6.3%, according to the Ministry of Economic Development.
Natalia Milchakova from Freedom Global also expects an acceleration in price growth by the end of autumn. Additional pressure may be exerted by difficulties in the fuel market and increased transportation costs. As a result, annual inflation may reach 6.5–7.5%, the expert predicts.
At the September 11 meeting, the Bank of Russia will choose between keeping the rate at 14% and reducing it by 0.25 percentage points, says Olga Belenkaya from Finam. In her opinion, there are more arguments in favor of a pause: the budget parameters, the fuel situation and the ratio of demand to economic opportunities are still unclear. A more complete picture will appear only by the October meeting.
Natalia Milchakova estimates the probability of maintaining the rate at 60%, and reducing it to 13.75% at 40%. The general deflation in August was provided by vegetables, but it hid the rise in price of a number of important goods — the very effect of the "Chinese box," the expert explained. According to her, if there is no sharp acceleration in prices in the fourth quarter, after the September pause, the regulator will be able to return to easing policy.
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