Wholesale prices intend to grow

A new survey of enterprises conducted by the Bank of Russia on September 1-19 recorded a continued slowdown in cost growth and an attempt to reverse the dynamics of companies’ selling prices. Earlier, in August, surveys of industrialists from the Gaidar Institute showed that enterprises were trying to get rid of deflationary expectations in price forecasts.

“The strengthening of the ruble in the second quarter of 2022 largely contributed to a further reduction in pressure from costs,” analysts from the Bank of Russia explain. They also note the first (after a steady decline in the previous five months) increase in price expectations of enterprises in the main sectors of the economy (see chart). It is found in most economic activities, but especially in motor vehicle trade and construction, “and may be associated with an expected improvement on the demand side,” the Central Bank concludes.

It is noteworthy that, according to the regulator’s surveys, the current costs of respondents, after rapid growth at the time of the shock of the second quarter in early September, were already at the level of January-March 2021. The Central Bank does not comment on whether the costs in sectors were reduced everywhere. However, according to S&P’s PMI market surveys, costs continued to grow in industry in August, albeit at the lowest pace since February 2020, and in the services sector, cost inflation was the highest since May and remained at a historical high, primarily due to an increase in spending on materials, utilities and salaries.

Recall that in September inflation expectations of citizens also stopped declining and fixed at historically high levels. “It is important to emphasize that price expectations have not returned to a normal level, remaining in the area of ​​increased values,” analysts of the MMI Telergam channel comment on these data of the Central Bank. “The reason for increased inflationary expectations is not economic factors (the ruble exchange rate, current inflation), but First of all, geopolitics. Economic agents are preparing for increased instability in the economy and markets.” It should be noted that after the announcement on September 21 of partial mobilization in the Russian Federation, the situation in the economy may become more complicated, primarily due to the uncertainty of further developments and personnel problems of enterprises.

Artem Chugunov