Inflation rate 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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Potato and Vegetable Prices Set New Records in Russia

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Most vegetables have risen in price by 1,5 to 2 times compared to last year and have set new records for September, when, as a rule, the supply of vegetables exceeds demand on the market.

When in June prices for carrots and beets in Russia reached unprecedented levels, officials hoped for a new harvest to significantly reduce the prices. However, most of the potatoes and vegetables of the so-called “borsch set” to be stored have already been harvested, but prices are record high and continue to rise.

“Last week, carrot prices jumped by 22% at once, and the price for potatoes increased by 8%. The summer drought followed by rains when the produce had to be harvested, affected both volumes and quality of the grown produce. Market participants fear that there will not be enough high-quality potatoes and vegetables that can be stored until spring. The second factor influencing the rise in prices is the continued rains that delay the harvesting of potatoes, carrots, and beets. Accordingly, the supply is not as high as it could be at this time” explains Andriy Yarmak, economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO).

By the way, Belarus is experiencing similar problems, where prices for vegetables and potatoes are also breaking records, and the country has already begun to import potatoes from Ukraine and other countries.

However, market experts emphasize that bad weather is not the main factor affecting the decline in production and the rise in prices for potato and vegetables. The vegetable growing crisis in Russia has been going on since 2019 and it was caused by a long period of low prices and low profitability of production.

Potatoes are currently sold in Russia on average twice as expensive as last year.

Carrots have risen in prices slightly less than potatoes, but their prices have increased sharply last week. According to market participants, they will continue to grow. At the moment, wholesale carrots are 69% more expensive than at the same time last year.

The situation with onion prices is better – so far they are sold only 17% more expensive than last year. Moreover, they even have a slight tendency to decline. Also, onions in Russia are now cheaper than in other countries of the region. Therefore, the downward trend in onion prices may soon be replaced by growth.

Note that in the first seven months of 2021, Russia increased its imports of potatoes by 70%, carrots by 19%, but reduced onion imports by a third. The largest volumes of potatoes and onions were supplied to Russia by Egypt. Large volumes of onions were also imported from Turkey, Uzbekistan, Kazakhstan, and China. The main part of carrots Russia imported from Israel, China, Egypt, and Belarus.

east-fruit.com

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

For the first time since 2017, RosStat recorded a monthly deflation in Russia

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In August 2019, consumer prices in Russia decreased by 0.2% compared to July, according to RosStat. The last time a monthly deflation was recorded in August and September 2017.

In August, food prices fell by 0.9%, while non-food products and services rose by 0.2%.

In August, the seasonal reduction in prices for fruits and vegetables influenced the food prices. Tomato prices fell by 24.9%, potatoes – by 22.4%, carrots – by 22.2%, onions – by 20.7%, beets – by 16.7%, grapes – by 16% , cucumbers – by 12.1%. Meanwhile, oranges prices increased by 2.8% and garlic – by 1.8%.

Year-to-August, inflation is 2.42% and year over year inflation rate is 4.33%

tass.ru

statbureau.org 

Fruit and Veg Prices Rising Much Faster in Russia Than in the EU

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Between January and May 2018, food products became 2.1% more expensive in Russia, while in the European Union, the same products saw prices grow by just 1.1%, according to the Federal Statistics Service (Rosstat).

The most notable difference was recorded in the price of vegetables, which grew by 14.4% in Russia, while in the EU they only increased by 2.7%. Meanwhile, fruit prices rose by 9.3%, while in the EU, they only increased by 6.7%.

It is worth noting that in 2017, the picture was the reverse, with prices in Russia rising more slowly than in the EU. Last year, food prices in Russia grew by 0.7%, while in the EU they increased by 2.6%.

www.freshplaza.com

Russian Price Gauge Falls

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Russia has done so well in vanquishing inflation that it pushed the core index of consumer prices to the cusp of falling below its level in the U.K. for the first time. While the Bank of England is under pressure to act after core inflation accelerated to the fastest since 2011, the same gauge reached a new historical low in Russia. Data released on Thursday showed Russia’s index of consumer prices that strips out volatile components such as food and energy slowed to an annual 2.8 percent in September from 3 percent a month earlier, according to the Federal Statistics Service. In the U.K., it jumped to 2.7 percent in August.

The Bank of Russia, which has delivered four rate cuts in 2017 by a cumulative 150 basis points, last month left open the possibility of pauses as well as decreases of a quarter to half a percentage point as it charts the way forward. Given that the central bank still sees inflation expectations as elevated and unanchored, it will “attach greater significance to pro-inflationary risks than factors acting in the opposite direction,” according to Governor Elvira Nabiullina.

“Core inflation is collapsing as the disinflationary forces generated by the recession in 2015-16 intensify,” said Neil Shearing, chief emerging markets economist at Capital Economics Ltd. “Against this backdrop, the incessant focus of policy makers on the need to anchor inflation expectations and thus easing policy only gradually looks increasingly misplaced.”

The central bank will cut its 8.5 percent benchmark to 8 percent by the end of the year, according to the median of forecasts in a Bloomberg survey.

Russia’s headline index of consumer prices reached 3 percent in September from a year earlier after already slowing to a record of 3.3 percent in August. The median of 15 estimates in a Bloomberg survey was for a gain of 3.1 percent. It remains within the central bank’s target of “near or around” 4 percent.

“The low core inflation rate shows the decline in pressure on overall inflation,” Vladimir Tikhomirov, chief economist at BCS Financial Group, a Moscow brokerage, said by phone before the data release. “There’s no pressure on prices from the side of consumption, which is reflected in both the core and headline indexes.”

The bad news for Russia is that the outsized role of fruit and vegetable prices in shaping inflation expectations means the core index is of less value for the central bank. While food accounts for almost 40 percent of Russia’s consumer-price basket, it’s closer to 10 percent in developed economies such as the U.K.

“Food prices play a key role in setting inflation expectations,” said Vladimir Miklashevsky, senior economist at Danske Bank A/S in Helsinki. Core inflation “won’t have a big impact on the consumer and monetary policy, as the key indicators for the Bank of Russia are the consumer-price index and inflation expectations.”

Still, the historic deceleration in Russian inflation to less than a fifth its level two years ago — and the even faster decline in the core index — shows how much headway policy makers made in keeping price pressures in check as they maintain a “moderately tight” stance. On an annual basis, core inflation peaked at 17.5 percent in March 2015.

“Such record lows for core inflation create a reserve for the central bank” in case of a price pickup “against the background of further recovery in consumption and an expected increase in wages for state employees at the start of 2018,” said Dmitry Polevoy, chief economist for Russia at ING Groep NV in Moscow.

The core measure is among the indexes the Bank of Russia uses to analyze trends in prices, allowing it to assess inflation “without the noise,” according to its draft policy guidelines for the next three years. Its other tools include inflation gauges that strip out the cost of housing utilities, fruit and vegetables, as well as state-administered tariffs and other regulated prices.

Inflation may be close to reaching a “floor,” according to Nataliya Shilova, chief analyst at B&N Bank PJSC in Moscow, who predicts the ruble will weaken in the fourth quarter. The ruble, which has gained 6.6 percent against the dollar this year, traded 0.3 percent stronger at 7:26 p.m. in Moscow.

“Of course, a downward deviation of more than one percentage point is significant, but according to our estimates, inflation will return to 4 percent in 2018,” she said before the data release.

www.bloomberg.com

Reuters: Russian Economic Growth Upgraded, Inflation Seen Slowing

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Russia’s economy is seen growing slightly faster this year than previously and inflation is seen slowing, a Reuters monthly poll of economists showed on Thursday.

The median forecast of 20 analysts and economists polled by Reuters in late August was for Russian 2017 gross domestic product (GDP) growth of 1.7 percent, above last month’s call of 1.4 percent.

Even though Russia’s economic outlook has improved, the poll’s median forecast is still below the economy ministry’s forecast of 2.1 percent this year.

Russia’s economic prospects could improve further, however, if the central bank cuts lending rates as analysts expect.

Respondents said the conditions were now right for the central bank to trim the key rate, now at 9 percent, at its next board meeting on Sept. 15.

A resilient rouble and steady oil prices have given the central bank room for a rate cut, analysts at Bank St Petersburg said in comments with their forecasts.

The central bank is now widely expected to trim the key rate to 8.75 percent next month, taking it to 8.25 percent by the end of the year, the poll showed.

“There are the conditions for a further rate reduction, and a step of 25 basis points is optimal,” said VTB economist Alexander Isakov. “It insures the central bank against overshooting the trajectory which leads to 4 percent inflation.”

The Reuters poll showed 2017 consumer inflation at 4.1 percent, compared with last month’s forecast of 4.2 percent.

This marks a slowdown of nearly 17 percent from early 2015.

Now, when headline inflation has already hit a post-Soviet low of below 4 percent, the central bank may embark on monetary easing cycle after keeping rates on hold since in July, the economy ministry predicted.

Russian Economy Minister Maxim Oreshkin said earlier on Thursday he expected consumer inflation to reach 3.5-3.7 percent by the end of the year.

“We think this would be among the factors that open the door for monetary policy easing by the central bank,” he said.

The poll also showed that the rouble is seen trading at 61.60 versus the dollar in a year from now RUB, slightly weaker than the 61.00 forecast last month.

www.reuters.com

Fruit and Veg Prices Expected to Fall by 80% in September

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The Russian Ministry of Economic Development has forecast that Russians will soon see a significant drop in food product prices. In September, compared with June, the cost of fruits and vegetables may fall by almost 80%.

In the first month of autumn, compared to the first summer month, the overall decline in food prices will be 1.3%. This forecast has been made by specialists of the Ministry of Economic Development of Russia, as reported last week by the newspaper Izvestia, which got a letter from the department regarding the socio-economic development of the Russian Federation in the coming years.

According to this information, the decline in prices for fruit and vegetables in September compared with June will reach 79.6%. In the autumn of 2018, prices for all food products will not differ much from the prices of the current autumn, the forecast says.

The agricultural producers interviewed by the publication agree with the conclusions of the experts of the Ministry of Economic Development and Trade.

“The Ministry of Agriculture reported that this year’s harvest is quite good, so the products will really fall in price. Every September, it is more profitable to purchase not only fruits and vegetables, but also mushrooms, as well as fresh red caviar, which hits the shelves at that time,” explained the industry representative to the newspaper.

www.freshplaza.com

Russian Consumers Paying a Pretty Penny for Apples

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The World Apple and Pear Association (WAPA) has reported that domestic apple production in Russia for 2017 is expected to be down by 37%, after late frosts and heavy rains hit production. However, this will not be the only reason why apple sales could be down this year.

According to industry sources, ‘The combination of rising apple prices and falling Russian consumer incomes has been the biggest factor in the decline of both imports and apple sales in the Russian market, industry sources acknowledge.’

Since 2013 the price of apples per kilogramme is up by 30%, more than any other fruit or vegetable in the country.

Despite recent increases in production, Marek Marzec from Ewa-Bis, said that Russian apple production only fills around 20% of the demand.

“Russia has been trying to develop the domestic apple industry for the last 20 years, sure, they have made some progress, but no where what is needed to become self sufficient. The positive thing about Russia is that it is such a large country with many different regions, they should be able always have success despite what the weather might throw at them.” said Marek.

Igor Muhanin, President of the Association of Fruit and Berry Producers (ASPRUS), had initially said that apple imports in 2016 had reached 1.38 million tonnes, but later revised that amounts to 1.25 million tonnes, saying that smuggling continued to be an issue in Russia, which authorities there have found it difficult to keep up with.

“The Agriculture Ministry is providing a subsidy payment to apple growers for planting new orchards and equipping them for higher yields of Rb236,000  ($4,140) per hectare. The experts say this represents between 10% and 25% of the costs of planting and equipping new high-yield apple orchards.” said Muhanin.

Estimates have claimed that Russian apple consumption came to 2.5 million tonnes in 2016, about 100,000 tonnes (4%) more than 2015. By 2020 the forecast is for consumption of 3 million tonnes; this represents an annual rate of growth of 4%.

According to BusinesStat, “The rate of growth of both domestic production and imports will depend not on the recovery of Russian consumer incomes and demand, and not on the sanctions or the increase in investments for commercial domestic orchards.”

“This year, apple sales will grow by just 1.7%, roughly the same as government and expert forecasts for Russia’s GDP growth. As the resumption of growth in real incomes begins, apple sales will grow in the retail sector. In 2021 the sale of apples in Russia will amount to 2.08 million tonnes, which will exceed the 2016 level by 35.7%.”

www.freshplaza.com

How Sanctions Changed Russian Food Market for 3 Years

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During the past three years, something Russians were used to doing in the 1990s has made a triumphant comeback: the habit of bringing food home from trips abroad. Shopping for food on vacation outside Russia has become a routine pastime for them since August 2014, when the Kremlin banned import of dairy, produce, fruit, meat, poultry, fish and seafood from the U.S., European Union and several other countries.

Authorities at the time maintained that the move would punish the West and boost the country’s agricultural sector, spurring it to thrive in the absence of competitors offering less-expensive products.

Three years later, officials insist it did. A closer look, however, presents a more uneven picture. Food production in Russia has increased, but so have prices. Higher prices have led to changed and lowered consumption, and in turn, reduced sales. Inflation has eaten into the promised government support to help food production. And, say consumers and people in the food industry, the overall quality of available food isn’t as high as it was prior to the food import ban.

The food embargo came at a bad time for Russia. Oil prices were at a record low, the ruble had plummeted and the country’s relationships with Western nations was worsening. The term “isolation” dominated the news here.

In an attempt at positive spin, the Kremlin announced that the food import embargo would boost “import substitution” and help Russians overcome what many politicians labeled their “addiction” to imported goods and become self-sustainable. Companies in the agricultural sector were promised financial and infrastructure support from the state. Many companies immediately jumped at the chance to conquer the market.

The agricultural sector has indeed increased production of some food items in the past three years, according to data provided by Rosstat, Russia’s state statistics service. Russian companies produced 17.5 percent more beef in 2016 than in 2014. Pork production increased 30.6 over the same period, poultry production 11.9 percent, frozen vegetables 31.6 percent, milk 5.8 percent and cheese 20.2 percent.

“The embargo was quite an incentive for us because it meant we’d be able to produce more,” says Andrei Danilenko, chairman of the Soyuzmoloko, Russia’a association of dairy producers. “Over these years, we filled the niche completely – together with Belarus that supplies the rest.”

Spokespeople at the Agriculture Ministry are even more positive. “For the first time in many years, Russian food items started to dominate on the shelves,” officials said in a written statement.

Food imports during the past three years dropped almost in half, the ministry said, from $43 billion to $25 billion, whereas overall Russian agricultural production has increased by 11 percent.

“Achievements of the agricultural sector in recent years allowed us to edge even closer to full self-sufficiency when it comes to food,” ministry spokespeople said.

However, there was a downside. Rising prices, spiked by the embargo and fueled by inflation, changed consumer behavior. People started buying less and sales started to drop.

“People in general are saving money on food, and we end up selling less,” says Pavel Grudinin, head of the Sovkhoz Imeni Lenina agricultural holding that produces vegetables, berries and fruit in the Moscow region.

With some products, consumers started choosing cheaper options, and that kind of behavior significantly affected the country’s fish market, says Timur Mitupov, head of the Fishery Information Agency.

“Russia used to import 600,000 tons of fish from countries under the embargo every year,” he says. “Then people saw that fish is disappearing from the shelves and becomes more expensive. So they started replacing fish with something more affordable – like chicken.”

Yearly consumption of fish dropped from 22 kilograms (48 pounds) per capita to 16-17 kilograms, Mitupov says.

Adding insult to injury, the promised state support turned out to be not much of a help, Grudinin says.

“Financial support from the government on paper increased this year, but if you convert it into hard currency, you’ll see that in reality it actually decreased, because hard currency is more expensive now.”

At the same time, he adds, various taxes and levies have increased during the past three years, and so have crediting rates: “So there is simply no money to invest into growing.”

For the restaurant industry, the food import ban is a double-edged sword. Many restaurants had based their cuisine on imported food items and shut down after the embargo, unable to adjust to the new reality quickly enough. Those that survived are experiencing a gastronomic renaissance, says Alexandra Sutormina, restaurant consultant and food critic for GQ Russia.

“Restaurateurs discovered Russian meat, Russian seafood, Russian vegetables. Russian food has become a thing,” she says. “They started experimenting with it, setting up their own small farms, selecting products more carefully.”

The quality of Russian food products, however, is far from the best, argues Victoria Lavrushkevich, manager of Saxon&Parole, an upscale restaurant in Moscow.

“We offer quality seafood and quality meat,” she says. “But Russian (food) products or products we now have to buy in other countries are worse in quality and the same in price compared to what we used to get from Western suppliers.”

Some food has turned out to be flat-out irreplaceable – like cheeses from Italy and France. It takes decades to produce a good mature cheese, notes Lavrushkevich.

Sutormina agrees: “Even though many small cheese farms appeared across Russia over these three years, wonderful cheeses from Europe is the one thing we all miss.”

The embargo has hurt the ordinary consumer in more basic ways, says Vasily Uzun, economy professor at the Russian Presidential Academy of National Economy and Public Administration.

“The embargo took the cheapest products off the shelves: Polish apples, American poultry and European cheeses. Products that replaced them turned out to be more expensive and of lower quality,” he says.