Runaway prices rise

According to Rosstat, consumer price index in June 2015 dropped by 0,2 percentage points in comparison with May 2015, when the index amounted to 0,4% (graph 1). Over a period of the first half of 2015 the inflationary indicator has been reducing. The dynamics of industrial goods producer price index has a differently directed curve. 

Graph 1. Change in index of consumer and producer prices for January-June 2015. 

In whole the annual inflation by consumer price index as of July 1st, 2015 is noted at the level of 15,3% (graph 2), following the results of 6 months – 8,4%. Producer price index achieved the level of 13,1% at an annual rate, following the results of 6 months – 11,1%.

Graph 2. Change in index of consumer and producer prices at an annual rate

The information concerning consumer prices index appeared in the beginning of August 2015 bears evidence to the fact that inflation in Russia accelerated to 0,8% against 0,2% in June. Accordingly the consumer prices at an annual rate increased by 15,6% and since the beginning of this year the inflation amounted to 9,2%.
According to experts of the Information agency Credinform, the key factor of the growth acceleration is the increase of housing and community amenities rate happened as of July 1st, 2015. The communal services costs went up at least by 6,0%-7,5%, in particular: hot water – by 6,3%, electricity - by 6,1%, cold water – by 6,0%, heating system – by 5,4%.

The analysts put on the second place the expected tendencies of the ruble devaluation in relation to dollar as a result of declining oil prices. In June the average price of Urals oil descended by 2,3 percentage points. At the moment the oil price is lower than 50 USD/bl. In this context Russian manufacturers raise the prices on petrol in order to compensate for losses appeared after sale of oil abroad. By doing so, they make their contribution to widening of inflation spiral.

The actions of the Central Bank of Russia led to the ruble devaluation in June-July 2015, too. The Bank started replenishing the exchange reserves, having considered that the ruble was strengthening too fast. However in the beginning of August 2015 the Bank of Russia announced the stopping of purchasing due to significant devaluation of ruble being under strong pressure of falling oil price.

Among other risks capable of cooling down the inflation, the experts of Information agency Credinform note the following ones:

• further devaluation of ruble;
• restocking of wholesalers’ products at the new price, that customarily happens in the third quarter of the year;
• upselling of currency for clearing of taken credits, payments of deposits etc. ;
• burst of consumption against the backdrop of reduction in import deliveries volume in Russia and fall-off domestic production level.