Deflation in Russia is Recorded for Second Straight Month – Rosstat

Deflation in Russia is Recorded for Second Straight Month – Rosstat

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The day before the Federal State Statistics Service (Rosstat) published data noting that deflation in Russia has been recorded for the second month in a row.

It was 0.39% in July. According to Interfax, price growth in annual terms also decreased last month and amounted to 15.1%, while in June it was 16%.

According to Vedomosti, prices in 30 Russian regions dropped by 0.5% overall, while prices in 10 Russian regions, on the contrary, went up by 0.1- 0.9%. Meanwhile, as noted in the Rosstat report, prices dropped 0.4% in Moscow and 0.8% in St. Petersburg.

Deflation in the first two summer months can be explained by the fact that at this time, prices of fruits and vegetables usually fall. Meanwhile, deflation is restrained by the traditional indexation of housing and utilities tariffs, carried out in July. If not to take into account this indexation, according to Interfax, the deflation would be even more significant.

As follows from the published data, prices for food products in the past month decreased by 1.5%, although in annual terms they increased by 16.7%. Fruit and vegetable products were 11.5% cheaper in July as a whole. Cabbage, potatoes, beets, tomatoes, carrots, garlic, cucumbers and onions fell in price by 4% to 33%.

However, prices of not only vegetables have declined in July. Eggs became 4.4% cheaper, and the cost of sugar decreased by 3.5% and buckwheat by 3.2%. The price of sunflower oil decreased by 1.4%.

According to the media, Rosstat also reported a 0.44% drop in non-food prices in July. The biggest reductions in this segment were observed last month for refrigerators (6.3%), as well as cameras (5.6%). Stand-alone mixers, which are in demand among housewives, also became cheaper by 4.4%. A downward trend in the prices of construction materials was also observed. Particleboards (6%), as well as metal tiles (5.1%) have fallen in price more than other goods in this group. The cost of lumber and laminate decreased from 2% to 3.5%.

Also from the data published by Rosstat, it follows that drugs that are included in the group of vital necessities, on average, became cheaper by 0.4%.

However, the cost of services continued to grow last month. If in July the growth was fixed only at 1.4%, in annual terms this figure was 10.7%. In addition, the cost of travel in passenger transport has risen, and the rise in price was a little more than 3%.

At the same time, the agency published data on the dynamics of prices during the first week of this month, namely from August 2 to 8. During this period, deflation in the Russian Federation was registered at the level of 0.08%. According to the data published by Rosstat for the first week of August this year and last year, we can state that in general, the annual inflation in Russia is slowly but still decreasing. In the first week of August, the agency also recorded a slight decrease in the price of sunflower oil, buckwheat groats, millet and chicken eggs. These are the products that are included in the food basket of the average buyer. However, at the beginning of August, according to the media, prices for lamb and sugar rose by less than 1%.

In August, fruit and vegetable products traditionally continued to fall in price, which is undoubtedly due to the harvest in many Russian regions. On average, this week, consumers began to spend 3.3% less on vegetables.

But the cost of gasoline and diesel fuel in this period of time practically did not change.

As previously reported, the Board of Directors of the Bank of Russia lowered the key rate at once from 9.5% to 8% at its meeting on 22 July. This decision, according to Interfax, was unexpected for the market, as before it was planned to reduce the rate only by 0.5 pp.

The Central Bank of Russia explains this decision by the fact that the growth rate of consumer prices remains at a low level, which is exactly the reason for the slowdown in annual inflation, according to Vedomosti. This trend, in turn, is associated not only with a number of one-time factors, but also with the restrained dynamics of consumer demand, i.e. the absence of panic among the population. This is very important because, as you know, demand breeds supply. The greater the demand for certain goods, the higher their price rises.

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