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hampered by further supply chain delays.
Inflation in the price of inputs also remains a problem. Higher raw material and transportation costs led to a faster rise in input prices, costs that firms were passing on to their customers.
Russian inflation remains stubbornly high with consumer price inflation (CPI) at 7.6% in March and producer price inflation (PPI) even higher at 19.1% the same month. (chart) However, the high interest rates appear to be
having some effect as PPI eased a little in March from February’s 19.5% and is down from just under 22% at the end of last year. Although faster than in March, the pace of charge inflation was nonetheless the second-slowest since last June, S&P Global reports.
The Central Bank of Russia (CBR) kept the prime rate on hold in April at 16%, but is struggling to contain inflation, especially PPI as the economy runs hot due to the demand created by military production.
Inflation remains at especially high levels for miners (45.8% vs 46.4% in February), as the energy-intensive nature of production made the sector especially sensitive to higher fuel prices amid the country’s refining capacity crisis thanks to Ukraine’s drone attacks.
Lifting costs for oil and natural gas producers are also soaring (62.1% vs 61.9%) and metal ore miners (33.3% vs 37.5%), Rosstat reports.
Prices also rose for manufacturers, but those increases have been a lot more modest (14.6% vs 15.1%). On the other hand, prices were loosely unchanged for utility providers (0.8% vs 1.2%).
Output growth remained sharp in April, S&P Global reports, as manufacturers noted that greater new order inflows supported the upturn.
Russia is currently spending 5% of GDP on defence, or around $100bn a year. It is currently massively outproducing Ukraine and Defence Minister Sergei Shoigu said last week that the Kremlin intends to continue to accelerate production output this year.
The rate of increase in general production was the second fastest since January 2017, albeit slowing from March’s recent high, S&P Global reports.
But Russia’s economy is not entirely dependent on military spending as Russian President Vladimir Putin is being careful to try and keep life at home as normal as possible. While the labour market remains drum-tight – unemployment in March was at an all-time low of 2.8% -- the shortage of manpower has driven up nominal wages faster than inflation leading to rising real incomes that is fuelling a consumption boom, according to the CBR’s latest macroeconomic survey. The workforce expanded for the third successive month in April. The rate of job creation slowed from March but was nonetheless among the strongest in over 23 years.
“Contributing to the rise in output was another steep expansion in new sales at Russian goods producers in April. Although the slowest for three months, the
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