Inflation in Russia, which has set records since 2016, began to slow down in April, Rosstat announced.
At the end of the last month, the consumer price index, calculated on the basis of the official basket of Rosstat, added 0.58% against 0.66% in March.
On an annualized basis, inflation eased from a 5-year peak of 5.8% to 5.5%, although consumer-level price increases continued across all three key product groups.
Food products have become more expensive by 0.84% per month, 4.21% since the beginning of the year and 7.12% compared to April 2020. This is just below the March reading, when food inflation set a 6-year record of 8.25% (yoy).
At the end of April, sunflower oil increased by 1.35%, sugar by 1.88%, meat and poultry by 0.89%, bread by 0.81%, vegetables and fruits by 1.02%, by 6.82% – eggs.
Annual growth for these products reached 27.32%, 40.28%, 8.61%, 8.09%, 4.75% and 30.96%, respectively.
Non-food products became more expensive by an average of 0.66% per month and 6.16% year-on-year. Monthly inflation slowed down by 0.06 percentage points, but annual inflation rose from 5.9% in March.
The cumulative total for 4 months increased the price of medicines by 8.51%, building materials by 8.73%, household appliances and electrical goods by 5.11%, and detergents by 6.41%.
Services are becoming more expensive almost twice as slow as inflation, although in this segment, according to Rosstat, the rise in prices accelerated from 3.2% to 3.3%.
Following the retailers rewriting the price tags for goods, the state joined the inflationary race: travel on public transport increased by 5.2%, water disposal by 4.5%, and housing and communal services in general – by 3.72%.
The slowdown in inflation in April is nothing more than a statistical mirage: the base effect of March-April last year worked, when “the rush demand for a number of goods at the beginning of the pandemic spurred prices up,” Rosbank analysts write.
Core inflation, excluding volatile commodities, accelerated from 5.4% to 5.5%.
At the consumer level, real inflation, however, is noticeably higher than the Federal State Statistics Service estimates. If we calculate it by the current consumption structure, and not by the virtual consumer basket, then in March it reached 6.6% with the official figure of 5.8%, analysts of the CEP of Gazprombank calculated.
This gap is 0.6 pp. – is the maximum since 2004. The reason is in the assessment of the contribution of paid services to the population in the price index: due to the pandemic, their consumption dropped, but the weight in the consumer basket remained the same. As a result, the share of this sector, where prices practically do not grow, in inflation is “overvalued”, explains Gazprombank.
It is not necessary to count on a significant slowdown in inflation by the end of the year, says Dmitry Dolgin, chief economist at ING for Russia and the CIS.
Food prices will continue to be driven upward by global food inflation, breaking records since 2010-11; At the same time, at the level of manufacturers, selling prices are already growing at a double-digit rate, and after the disastrous 2020, the business does not have a margin of profit so as not to shift this burden onto consumers, Dolgin notes.
Given the continued acceleration of weekly inflation (+ 0.2% from April 27 to May 4), the Central Bank of the Russian Federation will continue to raise its key rate at its June meeting with high chances, Rosbank predicts.
The process of tightening monetary policy may take another two or three meetings of the Central Bank, Dolgin believes: acceleration of lending to individuals ”.
The Central Bank, we recall, predicts a return of inflation to the target of 4% in mid-2022.