Dmitry Butrin on the complexity of analyzing the price picture in the fall of 2023

By the end of October, reading thoughts about the main topic in economic reality – the situation with inflation and prices in Russia – from a fairly simple activity turned into a real torment. Dozens of different analytical presentations of price dynamics in July-October 2023 (for example, they are contained in a systematized form in the Bank of Russia’s inflation review for October) are, of course, not needed for news readers with strong nerves and solid basic knowledge about the economy. How and at what speed different channels of transmission of the Central Bank’s monetary policy work on a horizon of one to three months is unimportant in the face of a simple fact: the key rate of 15% per annum, in principle, cannot fail to work. The question of whether inflation in the Russian Federation will decrease in the second half of 2024 to a stable “about 4%” is irrelevant – one can only guess in July or December. And if this happens a quarter later, it is unlikely that anyone in Russia will go bankrupt just because of these extra three months. This will most likely happen if the rosy hopes of Russian producers of consumer goods on price tags in six months are killed ahead of schedule by inflation that is falling too quickly, which is possible. But with the current business planning horizon—which is actually a quarter—2024 won’t come so soon. Therefore, inflation charts, which are generally useless, still want to be studied.

October-November 2023 is a particularly unpleasant time for this: unfortunately, the number of variables in the inflation equation is truly Homeric, it looks like chaos. For example, all volatile components of the CPI in October 2023 made a negative rather than a positive contribution to the overall indicator for the month, that is, year-on-year consumer inflation of 6.69% is more likely an accident; in more standard circumstances it would have been more. On the other hand, the peak of inflation as a process, based on the data of the Central Bank, apparently actually passed in September 2023; this, for example, follows from the regional distribution of inflation indicators. Inflation in services grew surprisingly slowly, and the “long-term” feeling of inflation, which, in theory, should be reflected in inflation expectations, apparently did not reach the population – the rate of growth in prices for everything except household appliances is now significantly higher than the annual average 4 % over the last two years. The latter indicator, like structural changes in prices, is probably “visible” to the population only after the fact and does not generate strong emotions.

Good for those who can watch these dozens of charts impartially – or avoid looking at them altogether before lunch. But if they include your future sales volumes before the New Year, we can only sympathize: it’s really not easy to understand. We can only wish you good luck: this is a business, not everything is calculated in it, and a mistake can be in your favor.