Analysts do not expect a repeat record deflation in Russia in August

© RIA Novosti / Vladimir Traveloperator in photobacteria banknotes and coins of Russia. Archival photoAnalysts do not expect a repeat record deflation in Russia in August© RIA Novosti / Vladimir Traveloperator the image Bank

Prices in Russia in August 2018 may die or be slightly reduced due to seasonal factors: the traditional end of summer — beginning of autumn reduce the cost of fruits and vegetables on the background of the new crop, but record deflation, which was recorded in August last year, this year will not happen again, believe polled by RIA Novosti analysts.

The economic development Ministry in a recent report predicted that the monthly inflation rate in July will return in the range of 0.3-0.4%, and in August will decrease to 0% or deflation of 0.1%.

«According to weekly data, we can say that 1 through July 23 has already accumulated 0,41-0,42 percentage points, so for the full month expect about 0.5 percentage points (annualized to 2.8%) or slightly higher. If so, it will be very close to the July figures 2014 and 2016,» — said RIA Novosti expert group research and forecasting ACRES Dmitry Kulikov.

According to Rosstat, from 17 to 23 July, the weekly inflation in Russia slowed down to zero. This year it almost all the time were kept at 0.1%. In the summer two weeks from June 26 to July 2, from 3 to 9 July, she was at 0.2%. The decline in late July, caused by the depreciating prices of fruits and vegetables: cabbage, tomatoes, cucumbers, potatoes.

This factor will have a major impact on prices in August. «On average, the deflation in the sub-heading food prices observed almost every year in late summer – early autumn due to the natural dynamics of the prices of seasonal goods, which are hard to store. This year, the seasonal deflation is possible for the same reasons, if we see the harvest, something similar to last year,» — said Kulikov.

No records

Last year the deflation in Russia in August reached a record over the history of observations of 0.5%, the trend of a fall in prices was in September, but made up only 0.1%. Then the Ministry of economic development, explained this trend is also a decrease of prices for fruits and vegetables.

Last year’s decline is also due to the fall in food prices on world markets and the strengthening of the ruble, which is not this year, said the Director of analytical Department of investment company «Loko-invest» Cyril Tremasov. «Last year’s record is unlikely to recur. The harvest this year will be worse, according to preliminary estimates, as usual for August-September is the most important factor. And all the rest: the ruble remains relatively weak, increased gasoline prices, but now they stopped,» he said, predicting zero dynamics of the prices in August.

A more optimistic Outlook for deflation in August — 0,2-0,1% — gives the chief analyst of Bank «URALSIB» Alexei Devyatov. «Last year, deflation was caused by weather conditions, was a cold June, then all the vegetables are ripe at one time, and spilled out on the market and we saw the result. This year more even weather conditions, so this will not happen. I think that in September we will not see deflation,» — said the ninth.

Annual inflation accelerated

Monthly deflation is a short – term trend that will have a strong impact on the indicators on an annual basis and at year-end, says Tremasov. In his opinion, annual inflation will rise in August amid a significant indicator of deflation last year in this period. «And the annual rate at 0.5% and will jump. If at the end of July, it will accelerate to 2.6-2.7% from 2.3% in June, at the end of August, the annual rate will be at 3.1-3.2 percent. At the end of the year within the 4%» — the analyst believes.

About accelerating inflation in annual terms in July, said the ninth, he believes that «at the end of September has all the chances to go over 3% year-on-year.» The forecast of economic development involves the level of inflation in 2018, at 3.1%.

Seasonal deflation in a period of one month is the norm, explains Kulikov. «A deflation in annual terms is already anxious. But in the foreseeable future, it is almost impossible,» he said. Negative effects from the annual deflation is the growth of real interest rates in the economy, as nominal interest rates become less flexible; the increase of the effect of deferred demand for commodities, that is, why buy now if in a month it will be cheaper; the real growth of debt burden, the analyst lists.

Not only deflation, but low inflation is not positive for the economy, said Tremasov. «A number of sectors suffer from very low inflation. Over the past year, most clearly manifested in the retail sector. All of our major retailers has decreased», he added. However, according to him, the cause of the deterioration was not only low inflation, but the lack of income growth. With the steady growth of such a collapse would not have happened in the sales of retail networks, he said.

According to Rosstat, real disposable cash incomes of Russians for 2017 decreased by 1.7% compared with a decline of 5.8% in 2016. In July, Rosstat reported that growth in real disposable incomes of Russians in June accelerated to 0.2% yoy from may’s 0.1% growth in real wages, in turn, slowed to 7.2% from 7.6% a month earlier. Real disposable income in the first half against the same period of 2017-an increase of 2.6%. Real wage growth for the six months amounted to 8.7%. Real disposable income is the income less mandatory payments, adjusted for inflation.

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