No more, so less: for the first time in the history of the Russian Federation, deflation is expected in June, by Inna Grigorieva for Izvestia. 28.06.2022.
How much prices will decrease and whether they will decrease all three summer months.
For the first time in the history of modern Russia, according to the results of June, there may be deflation - a decrease in prices for goods and services. This was stated by analysts of banks and financial companies interviewed by Izvestia. Prior to this, prices fell only in July and August - and, as a rule, this was due to the arrival of a new crop. Now, experts name the main reasons not only for the seasonal reduction in prices for fruits and vegetables, but also problems with imports, a sharp appreciation of the ruble and low demand from the population. The cost of goods in monthly terms can be reduced within 0.5% . A number of experts do not rule out that this summer prices will decrease for all three months. However, there is no cause for special joy: such a long deflation does not speak of the “health” of the economy.
Seven out of ten experts of financial companies surveyed by Izvestia expect a decrease in prices for goods and services in June in monthly terms . The largest reduction in the cost of products is expected in BCS World of Investments. According to expert Yevgeny Mironyuk, the reduction may be within 0.5% . According to the results of the first summer month, the managing director of the NRA rating service Sergey Grishunin expects prices to decrease to 0.4%.
“ There are three reasons: the seasonal decrease in the cost of fruits and vegetables, the strengthening of the ruble exchange rate from 120 rubles per dollar to the current 52–53, and, most importantly, the reduction in aggregate demand ,” he explained.
Deflation caused by a reduction in aggregate demand is extremely unstable and does not indicate the "health" of the economy, but, on the contrary, its "disease", Sergei Grishunin emphasized.
A continuous decline in prices is fixed from week to week from the end of May to mid-June , Natalia Milchakova, a leading analyst at Freedom Finance, drew attention. Most likely, by the end of June there will be deflation from -0.1 to about -0.3%, she expects.
From the beginning of the month to June 17, deflation amounted to 0.26%, with a decrease in the consumer price index recorded for three weeks in a row, and if we take into account the weekly pause with zero price changes from May 21 to 27, then five weeks, said the head of the FG macroeconomic analysis department " Finam" Olga Belenkaya. Against this background , deflation by the end of June is quite possible , she stated.
The situation, of course, is atypical and is associated with a number of factors : strengthening of the ruble exchange rate from absolute lows in March to highs since 2015, reduction in effective demand, temporary saturation of consumers after rush purchases at the end of February - March, — Olga Belenkaya explained.
According to Rosstat, from June 11 to June 17, prices fell most of all for granulated sugar (by 2%), eggs (by 0.6%), milk (by 0.4%), buckwheat (by 0.3%), sausages, small sausages, cottage cheese, dry milk formulas for baby food (by 0.2%), pork, sausages, vodka (by 0.1%).
If deflation in June in monthly terms really occurs, then this will be the first case in the history of Russia of a price reduction in the first summer month . According to Rosstat statistics since 1991, the smallest increase in the cost of goods and services in June occurred in 2019 - 0.04%. Prior to this, the lowest growth was in June 1998 - 0.08%.
The press service of the Ministry of Economic Development did not respond to Izvestia's request whether the ministry expected deflation in June. Earlier, Minister of Economic Development Maxim Reshetnikov called deflation in the first month of summer likely . According to Rosstat, in May 2022 versus December 2021, inflation in Russia was 11.8%. In annual terms, prices rose by 17.1% in May.
In the history of Russia since 1991, there has never been a deflation for three summer months in a row , according to Rosstat data. For two months in a row - in July and August - prices fell in 2011 . Then in the second summer month the cost of goods and services fell by 0.01%, and in the third by 0.24%.
However, a number of analysts interviewed by Izvestia do not exclude that in 2022 there will be deflation for three months in a row: from June to August.
We assume that the moderate deflationary trend will continue in July and August against the backdrop of a seasonal decline in prices for fruits and vegetables due to the arrival of a new crop . In addition, with regard to non-food products, the significant strengthening of the ruble, in our opinion, offsets the growth of retailers' logistics costs, - said Grigory Zhirnov, chief economist at VTB My Investments.
The expert added: against the backdrop of suppressed consumer demand, this may lead to some reduction in prices for non-food products with the development of parallel imports.
“As a result , in July-August we can see monthly deflation at the level of 0.2–0.5% ,” predicted Grigory Zhirnov.
In July and August, deflation could increase to 0.5-0.6% on a monthly basis , says Sergei Grishunin from the NRA. According to him, the fact of price reduction will be considered by the Board of Directors of the Central Bank at the next meeting on the key rate on July 22. And the expert did not rule out a reduction in the key to 8.5–9% from the current 9.5%.
In July, two scenarios are possible, believes Yevgeny Mironyuk from BCS World of Investments. The first is that the government takes the side of the Central Bank and does not attempt a non-market targeted ruble exchange rate. In this case, there will be near-zero inflation in July, he believes. Secondly, the authorities accept the position of the government, announced at the SPIEF by First Deputy Prime Minister Andrey Belousov (work on returning the exchange rate to 70-80 rubles / $), and take active measures of a non-market nature. In this case, inflation for July may be in the range of 0.4-0.8%.
Olga Belenkaya from Finam believes that there will be no deflation in July. This will be affected by the annual indexation of housing and communal services tariffs , which traditionally takes place in the second summer month.
Natalya Milchakova from Freedom Finance and Vladimir Evstifeev, head of the analytical department of Zenit Bank, believe that deflation may last until September inclusive.
In annual terms, prices in Russia are not falling, and there are no serious drivers that would ensure this in 2022–2023, said Dmitry Kulikov, Director of the ACRA Sovereign and Regional Ratings Group. In the spring, Russia experienced a rather sharp inflationary shock, the rise in prices has since slowed down, but in most reasonable scenarios, it should not go into a steady decline, the analyst believes.
According to the forecast of the Ministry of Economic Development, inflation in Russia in 2022 will be 17%.