The dollar in Russia fell, and prices rose again

In September-October, new price tags are waiting for us for the entire range of consumer goods: manufacturers literally announced an increase in unison even before the ruble collapsed to 101.7 per dollar. Today, when the Russian currency is already trading on the stock exchange at 93-94 and does not seem to be going to weaken further, there is no “rollback” in the pricing policy of suppliers. The question arises: why? What is more in this – the desire to quickly earn money on the hype that has risen around the exchange rate or an objective market and production need?

It is known, in particular, that in September, selling prices for coffee and tea will rise by 6-9% – due to an increase in the cost of imported raw materials and drought in a number of countries. According to Rosstat, chicken meat will rise in price by 11.5% in autumn, sausages and sausages – by 5-10%, lamb – by 6.6%, rolls and sushi – by 25% (due to problems with the supply of seafood and rice from – abroad), fish and canned fish – by 15-20%, buckwheat – by 10%, milk and dairy products – by 10-15%, imported alcohol – by 10%, chocolate and sweets – by 10%, juices and carbonated drinks – by 15-40%.

Shoes and clothes of Russian brands – by 10-20%, electrical goods – by 5%, smartphones and computers – by 10%, fans, air conditioners and dishwashers – by 3-10%, cars – by 10%, air tickets – by 15% -40%.

Over the summer months, the price of building materials has already increased by an average of 20-30%, but this is clearly not the limit: in September, another round of price increases for goods supplied to Russia from abroad is expected – putties, finishing materials, paints, varnishes. Which, in turn, will affect the cost of repairs.

Why is all this happening? With household appliances and electronics, the situation is a bit simpler: there are no full-fledged independent production facilities in Russia: few parts are of domestic origin, there are only assembly lines. Accordingly, this sector is almost 100% dependent on imports, and for it, in addition to the yuan that has become almost native, one has to pay with “unfriendly”, but firm and mostly stronger against the ruble dollars and euros. When buying electronics, importers and distributors enter into contracts for the supply of equipment with manufacturers, which stretch for six months or a year.

For example, since July 2022, when the dollar was worth 58 rubles, TVs have fallen in price by 14%: suppliers have included in current prices the margin that was formed a year ago as a result of the strengthening of the ruble. Today, the warehouses still have a lot of equipment purchased at the then exchange rate. Today, stores are in no hurry to put up new price tags, fearing a collapse in demand, arranging promotions. However, it is clear that this cannot continue for long.

As for Russian agricultural products, food, the final prices here are also determined by the exchange rate: sugar beet producers buy 95% of the seeds in the Netherlands, inseminators are supplied to us by Holland and France, even potato seeds are 60-70% imported.

Machinery and equipment are critically dependent on the supply of foreign spare parts, which literally force their way into Russia with blood through all sorts of sanctions, acquiring a lot of costs along the way. For businesses, the situation with the exchange rate is a kind of pincers: along with the long-term trend towards the strengthening of the dollar, the cost of loans for the purchase of imports is growing.

In part, enterprises are saved by the fact that if earlier (mainly before the pandemic) they bought products for the future for two or three months, today the “depth” of stocks is from six months. It is also understandable why businesses are in no hurry to adjust prices downwards in accordance with today’s exchange rate of 94 rubles.

“The dollar is still quite high, so manufacturers are pricing in growth of at least 3-5%, taking into account potential risks in their business model,” says financial analyst Sergei Drozdov. – I would even say that they are guided by the ceiling of 101.7 rubles, recently reached by the “American”. Yes, the Central Bank is taking some regulatory measures, but against the backdrop of sanctions and the current geopolitical situation, they look unconvincing.

The same meat processors sit and think: what should we do with new purchases from Latin America, wouldn’t it be better to refrain from them altogether in the foreseeable future, put the business on pause?

The worst thing for the economy is when the national currency depreciates smoothly over months, and not all at once. It is also a powerful psychological factor. In the spring of 2022, when the dollar flew over 120, the price tags instantly increased one and a half to two times, and when the ruble strengthened to 55-60 in the summer, there was no rollback, except perhaps for household appliances and electronics.

Accordingly, Drozdov argues, each new surge in the dollar rate leads to anchoring (the term of the Central Bank) consumer prices at a higher level. The weaker the ruble, the less the business has the desire to do anything, buy, take loans. He is left with one thing: to offer the Russians the cheapest low-quality goods, since the population simply does not have enough money for anything else.