In June, annual price growth accelerated to 3.25%

In June 2023, annual inflation accelerated to 3.25% from 2.51% in May, Rosstat said. The consumer price index on a monthly basis was 0.37% after 0.31% in May. Monthly price growth accelerated to 0.40% seasonally adjusted, according to the Ministry of Economic Development’s review “On the current price situation.”

In 24 regions of the country, inflation increased by 0.5% or exceeded it, according to Rosstat data. The maximum (0.9%) was recorded in the Altai Territory.

“In June, a significant impact on the dynamics of prices for food products had a reduction in the price of fruits and vegetables. Prices for tomatoes decreased by an average of 22.0%, onions – by 13.5%, bananas – by 12.4%, white cabbage – by 10.8%,” Rosstat said. In addition, prices for cucumbers (5.5%), fresh herbs (4.4%) and grapes (4.2%) fell significantly. The price of carrots (22.2%) rose the most in the first month of summer, the check also increased for potatoes (21.5%), lemons (16.1%), beets (13.1%) and apples (6.7%) .

In the food segment, prices slightly decreased by -0.01% in June after deflation in May by -0.31% mom. Chilled chickens (by 6.8%) and granulated sugar (4.62%) went up the most among the list of individual goods. Cheaper for the month – eggs and buckwheat (by 2.4%).

Non-food products in June 2023 rose by 0.42% (0.34% in May). Prices for gasoline in June rose by 1.6%, for diesel fuel – by 0.3%. Drugs that are not related to vital and essential drugs, on average, became 0.7% more expensive, and essential drugs – by 0.6%. Among non-food products, the strongest growth in price was shown by cement (5.9%), while televisions (2.1%) showed a decrease.

In the services sector, price growth slowed down to 0.83% in June after 1.13% in May. Housing and communal services tariffs have risen in price by 0.09% since May. In the list of services, sanatorium and health-improving ones showed the largest increase in price. “In June, among the services of domestic tourism and recreation, the cost increased: vouchers to holiday homes, boarding houses – by 9.8%, vacation trips to the Black Sea coast and Crimea – by 9.2%,” Rosstat said in a statement. The greatest decrease in price among services was shown by holidays in the UAE (2.7%).

In the service sector, inflation slowed down due to a slowdown in the growth of prices for passenger transport services and excursion services, the Ministry of Economic Development notes in its review.

The June inflation data confirmed that pro-inflationary risks are materializing, said the author of the My Investments Telegram channel, economist Rodion Latypov. And it’s not even about accelerating the pace year by year – this is always a lagging indicator, it’s more correct to focus on monthly indicators in terms of the year and adjusted for seasonality, the expert explained.

“In May-June, the current inflation rate accelerated. In January-April, they averaged 4% in annual terms. In May were close to 5%. In June, according to our estimates, they approached 6%,” he specified. At the same time, it is important that now the high current rates are not concentrated in services, but are evenly distributed over the basket.

According to Latypov, the weakening of the ruble since the end of last year began to be transferred to prices only from May – that’s when retailers had to replenish stocks and purchase imported products at updated exchange rate levels. In addition, consumer demand is steadily recovering, while the labor market remains tense, which translates into outpacing wage growth and higher costs for producers. All these factors do not give grounds to believe that inflation will slow down in the coming months, the economist points out.

The Central Bank, following the acceleration of the current inflation rate and the realization of pro-inflationary risks, will tighten monetary policy by raising the key rate, Latypov points out. An additional factor in such a decision could be the continued weakening of the ruble, he adds.

According to the forecast of the Ministry of Economic Development, inflation at the end of 2023 will drop to 5.3%. The Board of Directors of the Central Bank at a meeting on June 9 for the sixth time in a row since September 2022 left the key rate at 7.5% per annum. According to the regulator’s forecast, in the second quarter inflation will be at the level of 3.6%, and by the end of the year it may reach 4.5-6.5%. In 2024, inflation will reach a plateau. The target of the Central Bank for inflation is 4%. The next key rate meeting will take place on July 21.