Named the prerequisites for the autumn rise in prices

July may be the last month of deflation in Russia

Rosstat reported a slowdown in annual inflation in July to 15.1% – after June’s 15.9%. This gives some reason for optimism, in fact – absolutely amorphous. Every summer, the dynamics of consumer prices is determined mainly by fruits and vegetables, the prices of which are traditionally low due to the seasonal factor. But, as independent experts predict, starting from September, inflation will spin up again, and in December it may reach its highest point.

According to Rosstat’s calculations, deflation in July amounted to 0.39% after a similar 0.35% deflation in June. Recall that we are talking about a steady decline in the general level of prices for goods and services over a certain period of time. Deflation, as opposed to inflation, which entails the depreciation of money, leads to an increase in their purchasing power. But at the same time, it is a consequence of weak demand due to the reduction in real disposable incomes of the population, the desire to save rather than spend, and the lower availability of credit.

Earlier, the Central Bank, through the mouth of Elvira Nabiullina, said that the current deflation in the country was due to the March-April price surge, which spontaneously arose against the backdrop of sanctions, the loss of industrial and commercial ties, general stress and turbulence in the economy. Demand was booming and supply was volatile. Since then, the markets have been gradually adapting to a new reality for themselves, and deflation, along with the seasonal factor in the reduction in the cost of vegetables and fruits, is one of the derivatives of these adaptation processes. But this cannot go on for a long time, and not everything is simple with the figures of Rosstat.

“I don’t trust official statistics because I don’t feel any impact on my wallet,” says BitRiver financial analyst Vladislav Antonov. – Yes, fruit and vegetable products have noticeably fallen in price this summer, but nothing of the kind is happening with other goods. Imports in warehouses are ending, there will be no new deliveries. Parallel imports will not fully replace Western goods that were presented in our stores. Plus, the energy crisis will affect prices: if the goods reach Russia, then with a decent margin. The same smartphones for example. The situation is worsened by the drought in Europe, the hot weather in our country, the uncertainty with the harvest and the cost of fuel, and problems with logistics.”

In general, it’s too early to rejoice: despite the Central Bank’s downward revision of inflation forecasts to 12-15% by the end of 2022, it is highly likely that prices will start to rise from September. According to Antonov, only one thing can push them down – a collapse in consumer demand due to a lack of money from the population.

“In August, the seasonal factor will also manifest itself in full: this month, vegetables and fruits are usually cheaper than in July,” says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. – But in the autumn this trend will break off. The ruble will weaken as exports decline, more and more restrictions from the West come into force. Such, for example, as the ban on the supply of Russian coal that has come into force, which means billions of euros in lost budget revenues. Accordingly, exports in value terms will decrease, while imports, on the contrary, will grow. The demand for foreign currency will increase: it will grow stronger, and the ruble exchange rate will fall, contributing to the acceleration of inflation.”

As the interlocutor of MK recalls, inflation depends not only on the exchange rate of the national currency, but also on the general economic situation in the country. Our GDP continues to decline (in June, the decline was 4.9% in annual terms), the volume of industrial production, cargo turnover, and retail trade are declining. Since July 1, housing and communal services tariffs have increased by 3.37%, air travel in economy class has become more expensive by 14.1%.

“The Russians have switched to a crisis consumption model: save more and save, spend less,” says private investor Fyodor Sidorov. – And this situation will last for a long time, since the population does not believe in the stabilization of the economy, it expects deterioration. However, in the fall, citizens traditionally buy clothes for the new season, and on the eve of September 1, many families invest in a “schoolchild’s portfolio” – stationery, shoes. Therefore, soon inflation will pick up again, but not as rapidly as in the spring of 2022.”

According to TeleTrade’s chief analyst Mark Goykhman, in the autumn months, import volumes can grow significantly, as old stocks in warehouses are exhausted. Imported goods will cost more, and domestic production will decline due to the contraction of the economy. As a result, the ratio between the money supply and the content of goods will push consumer prices up – to the level of 16-17% at the end of the year.