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Thursday, October 27, 2016

In Russia came the deflation: the end of the crisis or the calm before the storm

The Russians have long waited for, and that happened in the second week, the ongoing deflation, in other words, lower prices. That is, the person is already a trend that experts predict may continue for another month and a half. According to Rosstat, in the period from 2 to 8 August 2016 the price tags on the products in the country “lost” an average of 0.1%. The magnitude is small, but in the overall economic dynamics is quite significant. Similarly, the fall in consumer prices was recorded a week earlier.

photo: Natalia Muslinkina

Continue to get cheaper tomatoes, cucumbers, potatoes, carrots and cabbage, which relate to seasonal products. With the approach of autumn prices are falling and traditionally that few people are surprised. It is nice that deflation is touched goods that do not belong to the category of “domestic preparations”. For example, in recent days, dropped the price on fish, eggs, rice and pasta.

In previous times, Rosstat reported that life in Russia has ceased to rise in price as much as in September 2011. The Ministry and the Ministry of Finance do not exclude that this year’s deflation will last throughout August. Interviewed by “MK” experts believe that blissful consumers, the situation can persist until mid-September.

According to financial analyst of “Finam” Timur Nigmatullin, usually the prices in Russia are reduced by new crop harvested our agriculture, but this year for seasonal factors superimposed effect of the strengthening ruble. We will remind that on Monday the dollar and the Euro reached the lows of two weeks: the Euro went below 72 rubles, the dollar was stuck below 65 rubles. Besides the positive trend is supported by the situation surrounding the normalization of relations between Russia and Turkey. And while Turkish tomatoes the road to the Russian market is closed, in the future, the lifting of the ban on imports of vegetables and fruits from Turkey also has to play on the drop in food prices.

“And so prices greatly increased in the past year, by 9.8%. This year they started from a high base last year, and it is clear that such jumps have to be perfect. Including due to low consumer demand. In General, from the beginning of 2016 products rose by 3.8%,” says Nigmatullin.

Seemingly exhausted by the rising prices, the owners of modest family budget should breathe a sigh of relief. However, economists warn that deflation can be much worse than inflation. It is only at first glance, lower prices are good. When the purchasing power of money increases, the consumer will only benefit. Unfortunately, the decline in prices that usually accompanies a crisis of overproduction, the result of which is economic stagnation, ruin companies, rising unemployment and falling incomes. With this problem, for example, have faced Japan and the countries of the Eurozone. However, Russia, according to Timur Nigmatullin, even a month and a half of deflation any negative consequences cannot have. In autumn the inflation rate will return to normal. In annual terms, according to his forecast, inflation will amount to 6-7%. Recall that the baseline forecast of the Central Bank’s inflation target for 2016 5-6%.

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