August paradox: why, becoming cheaper, products continue to rise in price

Once again, during the summer season, Rosstat gave us a portion of comforting data on a decrease in food inflation – now according to the results of August. It’s worth seeing! Indeed, according to Rosstat’s arithmetic, goods are becoming cheaper in literally all positions – and we don’t have time to blink an eye. According to official data, in comparison with July, food products dropped the cost by an average of 1.36%, non-food group – by 0.05%. As a result, annual inflation slowed down to 14.3%. But if you take a closer look at the numbers, then not all of them inspire optimism.

Even vital medicines fell in price by 0.3% last month. Although all other drugs that do not belong to this category have risen in price by 0.2%. A fly in the ointment in this barrel of honey is added by the fact that products (and not only them) are still … becoming more expensive! In annual terms, compared to August 2021. And not by some 0.5%, which hardly anyone will feel on their wallet, but by quite significant 16.59%. Even since the beginning of this year, from January to August, food prices, despite the summer deflation, have risen by more than 10%.

The same can be said about non-food products: a year ago they cost our pocket 15.5% cheaper.

How is this to be understood? Are goods getting cheaper or more expensive? Is the glass half full or half empty? It looks like it’s half empty. Indeed, according to the same Rosstat, the real wages of Russians continue to decline, in June – by 3.2%. Therefore, with our incomes, we hardly feel monthly price drops in stores. If deflation (price reduction) in August amounted to 0.52%, then how much cheaper, say, beef at a cost of 500 rubles per kilo? For 2.5 rubles.

Unless they are pleased with the prices of the vegetable group. At least now grab a bag and run to stock up for the winter. Potatoes (at a discount) 14 rubles a kilogram, carrots – 13, the same amount for beets … Such an offer is beneficial to the state, people are also not offended.

Although, as farmers say, it is a great sadness for them. During the period of mass harvesting, not all farmers have storage facilities to hold the harvest until better times. They sell vegetables straight from the field in a rush to make some money. After all, in a month and a half or two, the potatoes in piles will begin to rot, and you can’t attach them anywhere. Selling below cost. This year, due to sanctions, logistics, spare parts and plant protection products, it has grown by 50-70% for some crops. And the harvest is sold at prices lower than last year’s…

It turns out that we, the townspeople, seem to be profiting from their misfortune. But this, of course, is not for long. The Accounts Chamber predicts continued deflation in September and early October. Then everything – as cut off. The prices for the same vegetables will go up.

But that will begin, if, of course, to believe the official forecasts, only a month and a half later. So far, officials are dizzy from success, albeit local ones. Deflation in August amounted to 0.52% – after 0.39% in July and 0.35% in June.

True, summer monthly deflation is not such a rare event for Russia to draw far-reaching conclusions about the stabilization of the economy. This is always the case when a mass harvest begins. But in such a way that deflation is fixed for three months in a row… Even veterans do not remember this.

Is the dynamics encouraging? A light in the end of a tunnel? Before falling into euphoria, it is worth considering two points. First, this deflation came after a long and sharp rise in prices that continued throughout the winter and spring. So even their three-month retreat does not fundamentally change the picture of total high cost. Secondly, as we have already said, the overall picture is spoiled by numbers not in monthly, but in annual terms, because this is a much more accurate and statistically correct comparison.

And here’s what turns out. Only since the beginning of the year, since January, granulated sugar has risen in price by almost 34%, and since last August it has increased in price by 45%. It is possible that, as in previous periods of mass harvesting of pickles and jams, it will again make itself felt by disappearing from the shelves and triumphantly returning – but with a different price tag.

According to the results of the year, pasta increased by 25%, meat – by 11%, chickens – by 9%, dairy products – by 21%, butter – by 34%. Even bread with buns, with our record wheat harvests, has risen in price by 18% over the year.

In a word, it is too early for us to delude ourselves and fall into euphoria. Although some analysts predict that already in the first half of 2023, inflation may drop to 5–6%, or even to 4%. Do not rush to believe in these numbers! The most proven option is a couple of bags of potatoes in the cellar and jars of canned vegetables.