Inflation in Russia

Russian Inflation Jumps to 8.1%

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Inflation in Russia climbed to its highest level in almost six years in October as the government and Central Bank struggle to rein in rapid price rises which threaten to undermine economic recovery.

Inflation hit 8.1% last month, the Rosstat national statistics service said Wednesday — the fastest rate of price increases since February 2016, and more than double the Central Bank’s 4% target. That was up from a reading of 7.4% a month earlier and ahead of market expectations.

The higher prices come as policymakers around the world face the prospect of so-called “stagflation” — high inflation and sluggish growth — as the global economy continues to emerge from the coronavirus. In the U.S., inflation is currently running at a 13-year high amid major supply chain bottlenecks.

Russia’s Central Bank chief Elvira Nabiullina has for months sounded the alarm over global price rises, putting herself at odds with western policymakers earlier this year by warning them the uptick in inflation was not just a transitory phenomenon.

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Russia’s Inflation Picks Up After Ruble Crash

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Russia’s inflation rate rose to 2.5% in March, official statistics showed Monday, reversing a months-long trend of slowing increases in consumer prices and an early indication of the impact of a crash in the value of the ruble and the coronavirus pandemic.

The year-on-year inflation rate ticked up in March from 2.3% the month before, mostly due to an increase in food prices, according to the state statistics agency.

Russians started to stockpile food in March amid the coronavirus pandemic, which hit Russia shortly after oil prices and its currency the ruble slumped as a result of a collapse in talks between Russia and the OPEC cartel.

Among food prices most affected were those for sugar which rose by 13.5% on average, while grains and legumes were up by 13.4%, and butter by 9.2%.

The Central Bank warned on March 20 that the ruble’s depreciation could spark price increases, but insisted this would only be “temporary” and would be offset by the slowdown of the global economy.

The central bank added that inflation could now surpass the government’s objective of 4% for the year.

February’s inflation rate of 2.3% was the lowest in two years.

www.themoscowtimes.com

Cheaper Fruit and Veg Leads to Lower Inflation in Russia

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In July, inflation in Russia fell below the Central Bank’s target and amounted to 3.9 percent. This is evidenced by the data published on the website of the Federal State Statistics Service.

Such a sharp decline in inflation was not expected by any analysts, as noted by the “Parliamentary Newspaper.” According to the forecasts of 18 economists previously interviewed by Bloomberg, inflation had been expected to decrease from 4.4 percent in June to 4.3 percent in July.

The reduction of fruit and vegetable prices has apparently had a significant impact on the dynamics of food prices.

“Thus, white cabbage has become 34.5 percent cheaper, potato prices have fallen by 21.2 percent, and beets, tomatoes, cucumbers, bananas and lemons have recorded price drops of between 8.3 and 15.2 percent. At the same time, the prices for oranges and apples increased by 8 and 6.4 percent, respectively,” reported Rosstat.

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In 2016, Inflation Rate Reached its Minimum Rate for the Past 25 Years

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In 2016, the inflation rate was 5.4%, compared to 12.9% in 2015, according to Federal Service of State Statistics. This is the minimum rate for the past 25 years, according to IndexBox analysts: the previous record was in 2011, when the inflation reached 6.1%.

One of the main reasons of prices stabilization was strengthening of the ruble, connected to oil prices growth; in 2016, the average dollar exchange rate decreased by 17% to 60.6 rubles per dollar.

Another reason for the deceleration of the inflation rate was the tough monetary policy of the Central Bank: in 2016, the key rate was reduced only twice – in June and September (to 10%). This meant the growth of money market rates, which increased savings amount, slowed down credit activities and controlled prices growth.

Another reason was the decrease of domestic demand: for the first 11 months of 2016, the real income of the population declined by 5.8% and retail trade turnover – by 5.1% in annual terms.

In 2016, the inflation rate for food products was 4.6%, compared to 14% in 2015, for industrial goods – 6.5%, compared to 13.7% in 2015, and for paid services – 4.9%, compared to 10.2% in 2015.

As for the inflation rate forecast for 2017, despite the decline in inflation rate, it may not reach the forecast level of the Central Bank (4%), according to analysts. One of the reasons for that is the recovery of the domestic demand, which is very likely as real incomes got more stable. According to IndexBox, the inflation rate of 4% may be achieved if the embargo is lifted.

www.indexbox.ru

Russian inflation rate was 12.9% in 2015

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Russian annual inflation for 2015 on consumer prices was set at 12.9 percent, according to Rosstat’s final statistics for the year.

According to earlier predictions by the Russian Economic Development Ministry, inflation was set at 12.5 percent. At the end of December, Economic Development Minister Alexei Ulyukayev said the inflation rate for 2015 would be approximately 13 percent.

Russia saw an economic downturn in 2014 after the United States and the European Union imposed economic sanctions on Moscow over its alleged involvement in the Ukrainian crisis. The ruble lost about half its value against the dollar.

In late November, the International Monetary Fund (IMF) said Russia’s economic outlook had been improving, with the country’s economy heading toward stabilization. The IMF predicted Russia’s inflation rate to continue to fall further during 2016.

Last month, Russian Finance Minister Anton Siluanov said that the inflation in the country would slow down to 6-7 percent in 2016.

www.sputniknews.com

Real wages and retail sales falling, while unemployment rate rising

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Retail sales fell 13.1% year over year, worse than the 11.5% market estimates. The decline likely means consumption declined in the fourth quarter.

“This will cause the recession to be extended for at least a sixth quarter,” says Daniel Hewitt, a Russia economist with Barclays Capital in London.

Real wages fell 9.0%, but that’s better than the 11% decline in October. Unemployment on the other hand rose to 5.8% from 5.5% in October, so within any margin of error.

Russian industrial is still negative, falling 3.5% on the year. Consensus estimates had it at -2.9%. The good news is that the negative numbers are not as high as they were a few months ago. They’ve been on the upswing for the past six months, but are still in the red.

www.forbes.com

Retailers announced downturn in prices

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Suppliers explained the price increase with the increase of product cost in foreign currencies during the devaluation of the ruble. Now retailers are waiting the same trend when the ruble is strengthening.

Director of External Communications of Auchan Russia said that prices have already fallen for cereals and canned food. As for fresh products, seasonality is very important: for example, prices for fresh fish has fallen by an average of 30% since December 2014 due to seasonality and ruble prices.

Most retailers have their own import departments, and it is easier for them to revise the prices for some imported products, they can more quickly react to changes in exchange rates. “The most notable changes can be seen in prices of vegetables, fruits, fish and seafood,”- said the representative of the Russian network of Metro Cash & Carry. Prices for fruits and vegetables have decreased by 10-11%, prices for fish – by 10-15%.

Negotiations between retailer and suppliers are in the process.

www.top.rbc.ru

 

Ministry of Economic Development forecasts inflation peak in March-April

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Ministry of Economic Development of the Russian Federation forecasts inflation peak in March-April, when it can reach 15-17% in annual terms, said Alexei Vedev, Deputy Minister of Economic Development, on Wednesday, January 14.

“The peak of inflation will be in March-April, yoy inflation in this period may reach 15-17%,” – said the deputy minister. He also said that by the end of 2015, inflation is expected to be double-digit”. Vedev added that this number will be affected by the dynamics of imports and the ruble exchange rate fluctuations.

January 12, Russian Federal Statistics Service confirmed that inflation rate in the country in 2014 was 11.4%, that is the highest rate since 2008. Then, consumer prices rose by 13.3%. In December 2014, consumer prices rose by 2.6% – food products rose by 3.3%, non-food products – by 2.3%. As for 2013 inflation rate, according to the Federal Statistics Service, it was 6.5%.

The official forecast for inflation rate in 2015 made by Ministry of Economic Development in the beginning of December was 7.5%. In the end of December Alexei Ulyukayev, head of the Ministry of Economic Development, announced that accordu=ing to the new forecast of the Ministry, inflation will be 10% in 2015.

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Supplies to retail chains frozen because of the collapse of the ruble

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Prices in shops cannot follow ruble devaluation: before retailers dictated terms to suppliers, now wholesalers lay down terms to retailers. If retailer do not want to increase purchase prices, deliveries of products may be suspended.

Maria Kurnosova, representative of the hypermarket chain Auchan, reported that part of the suppliers, both food and non-food categories, sent a letter that they would stop the shipment of goods, if the retailer did not increase purchase prices.

Some producers reported that a similar situation occured with Metro Cash & Carry: part of their suppliers stopped shipments or warned about this.

Anastasia Orlova, representative of the retail group “Dixy”, said that there were no breakdowns in the supplies, although some suppliers sent requests to increase purchase prices, they also refused to participate in the discount promotions.

Despite the penalties (up to 50% of the contract value), many suppliers suspended work. Small companies, unlike large multinational companies, cannot supply at a loss for so long. About 70% of the suppliers are in the process of negotiations, and if after a day or two retail chains refuse to accept reasonable prices, deliveries may stop at all, according to the head of the association “Roschaykofe” Ramaz Chanturia. “Empty shelves will cause panic among the population”, so retailers are likely to make concessions, he said.

Producer of fish and seafood “Agama” informed retailer about price increase in proportion to the increase of the dollar on Tuesday, said Yuri Alasheev, chair of the board of directors, they gave retailers a week for approval. He said, that most networks responded “quite calm”. “I think the situation will be clarified by Monday, when retailers will respond to our letter”, said Alashaev.

Wine importer Simple stopped selling wine for a while, it is not possible to order drinks on their website at the moment. Online assistance of the website confirmed that the sales were frozen because of the economic situation, and the problem would be resolved in a day or two. Anatoly Korneev, vice president and co-founder of the company, said that this was a “temporary measure”.

Andrew Agarkov, commercial director of the supplier Uvelka (buckwheat and rice) said that they continued supplies to retailers with the old purchase price and would raise prices in February according to the plan after the negotiations with retailers.

With the constantly growing currency rate there is no time for neg long negotiations on the revision of the price, although there is a rule that it should take 45 days, according to Dmitri Leonov, deputy chairman of the association “Rusprodsojuz”.

www.top.rbc.ru

Russia rejects shipment of fruit

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The international market for pears and apples is changing. The decrease in the consumption of fruit in Europe and the veto decreed by Putin on the West are changing the economies of large blocks and market flows.

Russia is a prime example of this. On Tuesday, the Russian government devalued the ruble by 5.4%, which has accumulated a depreciation of 52% since early August, when the trade war with the EU and its allies began. This scenario is generating widespread losses in the Russian economy and its effects are starting to be felt in the fruit sector.

Importers of Argentine fruits are unable to meet their commitments because of the deterioration suffered by the local currency in recent times. “They close their agreements with the exporters in dollars and receive rubles for their sales. It is not difficult to understand the crisis they are experiencing,” confided one of the market participants when asked about the issue.

This week a ship with 43 containers of more than 700 tons of apples and pears from the Rio Negro Valley and Neuquén was rejected in Vladivostok, a port city located in the Russian Far East Pacific. Argentina’s Chamber of Integrated Fruit Growers (CAFI) confirmed that the importer failed to pay the freight and port services and therefore the fruit had been rejected.

“The problems that lie ahead with Russia are very complex for the Valley,” said Marcelo Loyarte, manager of CAFI. The official said that the ruble’s devaluation “is hitting the regional fruit producing sector as the dollar is anchored at 8.5 pesos here and internal costs are growing.”

The high expectations about the Russian market are evaporating as the harvest in the southern hemisphere approaches and Putin’s economic problems deepen. Part of these problems are due to the drop in international oil prices. Russia, one of the largest exporters of oil in the world, depends on oil sales. Hence, the 35% fall in the price of a barrel of oil will significantly affect the country. The acceleration of the devaluation of the ruble looks to mitigate the negative effects of this economic scenario.

The Rio Negro Valley exports an average of 90,000 tons of pears and apples to this market per year. Exporters are very concerned as Argentina’s exportable supply loses competitiveness in a market that has already devalued its currency by more than 50% in just a couple of months. They wonder if Russian imports this season will ratify the historical purchase volumes and if prices will be good enough to cover the costs in the Argentine market.

www.freshplaza.com