for 2024, the accumulated monthly growth in real wages in Russia amounted to 7%

According to Alexander Isakov of Bloomberg Economics, the bias in the sample of companies surveyed by statisticians (see Kommersant, September 7, 2023) continues to overstate real wage growth by about 1.5 percentage points from the 8.5% annual growth rate estimated by Rosstat in December 2023. Over the year, the accumulated monthly growth in real wages amounted to 7%. The sampling bias, which led to such noticeable distortions, we remind you, does not occur due to statistical deficiencies – and is a useful indicator of structural transformation: companies that cannot withstand the wage race are leaving the market, Mr. Isakov believes.

Against this background, high inflation, one of the reasons for which was competition for employees in industrial sectors in terms of wages, as Gaidar Institute analysts note in the latest issue of economic monitoring, is a growing limitation for industry. “At the same time, wage growth occurs in industries that are associated with the production of products intended for the needs of the defense industry, but the rise in prices affects the entire population,” they note. Thus, according to analysts from the Center for Macroeconomic Analysis and Short-Term Forecasting, the indirect social effect from the structural component of inflation (“inflation for the poor”) continues to remain negative, although it is noticeably decreasing. “This is due to the accelerated rise in prices of food products (fruits and vegetables, chicken), consumed largely by the poor,” they explain. At the same time, the real amount of assigned pensions, overestimated according to the CPI for the poor, has already been noticeably lower for three months than last year’s level (“the usual” amount of real pensions is two months), they record.

Traditionally, the peak of wage growth usually occurs in the first quarter of the presidential election cycle, and the effect of this growth (peak pressure on consumer prices) lags behind wage growth, notes Mr. Isakov. This time, the jump in wages occurred noticeably earlier (see chart), which excludes the return of inflation to the target before August, and the Bank of Russia will revise the inflation forecast in April 2024 to 5–5.5% y/y for the end of the year, we are convinced Bloomberg Economics. It is possible, however, that the traditional pre-election hike in wages will also be implemented.

Artem Chugunov