Spring price anomaly: inflation is declining, while its expectations are rising

The Russian economy is slowly but surely moving towards a decrease in annual inflation to a level of 5-7%. Vladimir Putin set such a difficult task for the government at the end of last year, referring to the “obvious downward trend in inflation.” So far, everything is going according to plan and even with some lead. Over the past week, it slowed down in annual terms right up to 2.82%. True, judging by a sociological survey initiated by the Central Bank, Russians do not particularly trust this arithmetic. According to their subjective estimates, inflation over the past year has grown by almost 15%.

So, inflation in Russia in annual terms, for the period from 11 to 17 April, amounted to 2.82%. A week earlier, it was fixed at 3.15%. According to the results of this year, as predicted in its review “On the current price situation” of the Ministry of Economic Development, it will be within 5.3%.

By all appearances, it turns out that the authorities have more or less curbed the rise in prices, and the long-awaited stabilization is coming in the country’s economy. Although the exchange rate of the ruble in these April days, and strongly staggered. And therefore it is not clear whether life becomes easier or not. Yes, according to Rosstat, inflation is declining, and you can’t argue with that.

But it is all the more offensive that our fellow citizens do not notice this point blank.

Some experts believe that consumer sentiment in society is to blame. Against the backdrop of the lowest inflation, they turned out to be the highest over the past 5 years.

The survey of the sociological service Infom, commissioned by the Central Bank on this topic, produced disappointing results. The assessment of current inflation by Russians began to grow. In April of this year, they determined the increase in prices according to their feelings at 14.9% per annum.

Analysts note that such an imbalance (minimum official inflation and maximum expectations for it) does not directly imply that a sharp rise in prices may occur. However, some inflationary pressure cannot be completely ruled out.

But what about this giant – almost 5 times! – the gap between official data and our “inner voice”, the belief that prices in the consumer market are rising? Which numbers are more trustworthy? Maybe it’s time for Rosstat to change the method of calculating inflation, to “bring” it, so to speak, to the people’s feelings?

“There is no need to change anything, Rosstat considers inflation for a very wide range of goods,” explains Mikhail Belyaev, Candidate of Economic Sciences, financial analyst. – There are about 300 of them. For some positions, prices have increased, for some they have decreased … It follows that, in general, annual inflation at the present moment is 2.8%.

And the participants in sociological surveys, of course, do not consume 300 types of goods, products and services, so they mean something completely different. This is, first of all, household inflation, a very narrow list of goods that they buy every day and whose prices are growing the fastest. People, of course, are a little warmed up emotionally and express their inflationary expectations.

– What is it?

– A purely psychological moment, a person’s internal forecast of what can happen in the near future with prices. There are many factors here: feelings of instability in the economy, uncertainty about the future, the experience of past years, and so on. From all this put together, the person answering the sociologist’s question draws the disappointing conclusion that prices will rise by, say, 10 or 15%.

Not only is the majority of Russians interested in a very narrow range of consumer goods, but purely psychologically, everyone remembers exactly those that have risen in price the most. It doesn’t matter when: a month ago, a year or three years ago. For example, already quite old stories about the anomalous rise in the price of sunflower oil, buckwheat or sugar, sunk into the soul of many. Based on this, a person draws his conclusion today. Hence the big gap in numbers.

– Does it mean that inflation expectations have nothing in common with the real economy?

– Not certainly in that way. This is a political and economic concept, our Central Bank often operates with it without lowering the key rate. And explaining this by high inflationary expectations. After all, economics and psychology in the consumer market are very closely related. The readiness of people for a certain increase in prices is often used by producers and trade to their advantage. If a person is psychologically resigned to the price increase, then why not make small steps towards it? One or two percent?

To a certain extent, we ourselves provoke inflation with our expectations. But one cannot say that inflationary expectations are the main factor in price growth. They can and should be resisted.