What will happen to prices in Russia low demand against a weak ruble

Since then, in late February, the dollar exceeded 65 rubles, and began to update the highs of recent years, the whole country with voltage monitors the prices in the shops, waiting for the acceleration of inflation to double-digit values. As you approach the pandemic in March reasons for optimism dwindled. Shops, has experienced several waves of invasion of buyers who first purchased cereals, later week stock of food, and by April, ginger and lemons. This led to the appearance of the empty shelves, the hype, the shortage and rising prices in some cases by hundreds of percent.

With empty shelves retailers fairly quickly sorted out, but they say that to keep prices as they are able with great difficulty. The largest network of record growth in the number of notifications from suppliers on more expensive purchases. Not all of them are satisfied, but the fact is that many basic goods in the wholesale sector tend to higher prices. According to the HSE, on average, by 5-15% and on some products such as rice and oil – up to 50%. According to “Rusprodsoyuz”, up to 20% depending on the category (up on canned food, tea and coffee).

the Official study commissioned by the Central Bank indicate that inflation expectations of Russians (“visible” consumer inflation) in March fell slightly, but remained relatively high – about 8%. But this is three times the official statistics and analysts ‘ forecasts.

Lowering this Friday rate by 0.5 percentage points, the Bank of Russia once again said the risks of inflation falling below the target of 4% and predicted that in the summer of price dynamics will unfold in the opposite direction.

All economists now split into two camps. Some believe that low demand will beat inflation, as predicted by the Central Bank. Others believe that prices in Russia may grow even in the face of falling incomes. In favor of the first version says the fact that 2016 inflation – official and observed – consistently fallen behind demand. And even the VAT increase of 2% in 2019 not allowed sellers to fully shift it into the price tags for the entire previous year for all the reasons prices have managed to rise only 3%.

In favor of the second, “proinflationary” version say only the perception of consumers and experience crises of 2008 and 2014, when average prices actually grew double-digit pace. But if you look at this data, then after each devaluation, which led to higher prices in 1,5-2 times faster than the previous years, began a protracted period of 4-5 years, when inflation has been below the pre-crisis.

there are Many signs that the scale of inflation in Russia over the last decade, fundamentally changed. To see on average increase prices by 10%, and even more so above this now requires more than the fall of the ruble. It seems that the national economies�� matured to the point where inflation is not just “install” from the top producers and sellers. It all depends more on the end customer who simply are not willing to pay more. And this means that in the short term we may see prices move not only forward but also backwards.

From the data of Rosstat, it is clear that the trend has turned in the direction of deceleration.

food for March rose by 1%, of which cereals 2.9%, including the notorious buckwheat 6.2%, medicines – by 1.3%, consumer electronics – 2%. Of all the commodities the largest increase was in those not called in March’s absolutely no rush: tomatoes (+14,9%), onion (+14,1%) and sugar (+13.5 percent). A sharp drop in prices for cucumbers (-16,4%) also was not seen by a broad audience.

In April, prices continued to rise, but at a pace to keep up with the dollar they will not be able to even for a few years. If at the end of March, annual inflation (spring 2019) amounted to 2.5%, taking into account the first two weeks of April, it rose only to 2.9%. So, in the first week of April average daily rates grew at 0,047% (if you bring them to the annual level that 15.8 per cent). And already after the second week, the growth fell to 0,036% (a more usual annual scale is of 12.3%). Against the dollar, which since February has gained against the ruble from 20% to 30%.

Partly this contrast between the observed, expected and official inflation can explain methods of calculation, which, by the way, April has changed. Rosstat almost twice expanded the set of goods and services to be included in the weekly price index. For example, there appeared such categories as meals in cafes and trips to Greece, who this spring is not expensive. On the other hand, in favor of the version about the real slowdown in inflation indicated by data of the Ministry of agriculture, which in April showed a serious drop in the prices the producers of vegetables to 36.7 per cent in annual terms, and the meat producers not rise above 1.1 percent.