Page 42 - RusRPTAug21

Inflation in 5m21 driven by rising local demand, global food prices. Demand exceeded pre-crisis levels in the non-food segment and became a pro-inflationary factor. Domestic tourism is also rebounding, which is driving inflation in the hotel segment higher. In the food segment, however, demand in real terms is still lower than before the crisis. Here global inflation is currently the most important factor.
Expectations amongst the most vulnerable segment of the population continues to rise, ticking up in June to 12.9% from 11.8% a month earlier – double the actual rate of inflation.
Consumer price inflation (CPI) has surged since the state of this year to reach 6% in May, according to the most recent data from the Central Bank of Russia (CBR). That is up from 5.2% at the state of the year and 3% in May 2020.
Food prices and broken supply chains have contributed to the problem. Russia’s manufacturing PMI surprised analysts by falling in May, while it has rocketed to record levels in Central European markets thanks to the release of a year’s worth of pent up demand. Russian panelist for the PMI reported they were struggling to meet orders and supply chains was making it hard to get inputs that has also lead to a spike in the producer price index of inflation (PPI) to 35% -- its highest level ever.
The CBR commissions a month survey on inflation expectations from the Public Opinion Foundation (FOM) that divides society into three categories: the median result, a subgroup with savings and a subgroup without savings.
The median inflation expectation for June was 11.9%, well ahead of the actual 6%, whereas the subgroup with savings had an inflation expectation of 9.7%. But expectations were highest amongst the subgroup with no savings that think inflation will rise to 12.9%. The poorest Russians are the most sensitive to inflation as a larger share of their monthly outgoing to is spent on food – up to 50% by some estimates – so price hikes are more painful.
At the same time FOM survey’s businesses which expected inflation to rise to 27.5% over the next 12 months, up from under 20% the start of this year and in keeping with the expectations reported in the PMI survey.
42 RUSSIA Country Report August 2021 www.intellinews.com