Conspiracy of prices

Economist Igor Nikolaev about the specifics of Russian inflation

An annual inflation in Russia has slowed one and a half times since the beginning of the year . However, the effect of the main factor of such a sharp braking will soon come to naught. Whereas the fundamental reasons why, even with a collapse of imports into the country , devaluation increase in prices in it goes through the full extent. And if there was a new weakening of the ruble due to my cheaper oil, the rise in prices in Russia does not even hold on a sharply fallen domestic demand.

The annual pace of inflation in Russia by the end of the first decade of March, judging by Rosstat, slowed down to 8% - from 12.9% by the beginning of 2016. It turns out that the factor of the “high base” of the first months of last year, when prices accelerated to almost 17%, manifested itself, as expected, in full, while the factor of the new “wave” of the ruble devaluation in December-January is only partly.

“There is nothing surprising in this-circumstances were manifested that there simply weren’t there last year,” said Igor Nikolaev, director of the Institute of Strategic Analysis of the Audit and Consulting Company,

- I mean the restrictions on the demand, which are now much higher than they were a year ago. The real incomes of the population in 2015 fell by 4%, real salaries - by almost 10%. This is very serious. After all, a strong weakening of the ruble occurred a year ago, and again repeated recently. But just consumed restrictions were manifested in the fact that annual inflation is now significantly lower than then.

- The ruble exchange rate, following the prices of oil, over the past three months, first decreased by 20% (by January 22), and then grew up and now actually returned to the levels of mid -December. According to your ideas, such strong, but relatively short fluctuations in the course to what extent are transferred to current retail prices?

- They can be shifted to current prices if there were not those very aware restrictions. Without them, “elasticity” (that is, the dependence of prices on fluctuations in the ruble exchange rate) would be higher. And so, indeed, it turns out that even with such fluctuations in the exchange rate, the price, it seems, does not change so much. The main reason for this is the restrictions on demand. Due to the fact that real income, real salaries in the country have decreased significantly.

As the situation worsens in the economy, consuming restrictions will have a lesser impact on the dynamics of domestic prices. Actually, we already took place in the 90s

- Last year, the landmarks for retail prices in the country, in fact, became those minimums of the ruble that were reached back in January - 70 rubles per dollar plus a “reserve”. In January 2016, the minimum was much lower-84-85 rubles per dollar. It can be assumed, theoretically, that it is now laid with some kind of margin in trade prices. However, in view of the fallen demand, can we talk about the repetition of this scheme last year ?

-We already see that the scheme of the last year is not repeated in this case ... But here it should be borne in mind that, although the uncertainty of the economic situation is preserved , in general, some adaptation has occurred. Recall that at the end of 2014-early 2015 there was a real shock. The weakening of the ruble that took place recently, that is, a year later, was no longer a shock. Although the ruble weakened quite comparable, and at some points-even stronger than then. So, consuming restrictions in the economy, as well as some adaptation of it and explain why now domestic prices are no longer so much follow the ruble exchange rate.

Когда цены бьют очень сильно по кошельку граждан, их внимание естественным образом в первую очередь обращается на то, что быстрее всего дорожает

-The volume of imports to Russia has been sharply reduced for two consecutive years, and very strongly-by 30-40% per year. In theory, such a decline would have to very noticeably restrain the growth of domestic prices due to the devaluation of the ruble -since it is through imports that it manifests itself in inflation. However, this, in fact, did not happen and did not happen. Why? Even taking into account the fact that the share of imported components or raw materials for so many goods produced in Russia itself remains high ...

- The explanation, in my opinion, is simple. Yes, it is fair to talk about imported components that are included in the price of products. But only this cannot be explained. Another factor is manifested here. With insufficient competition in the economy, both sellers and manufacturers, faced, as today, with a fall in demand, simply “lift up” prices. If in Russia, an economy with a high level of competition, this would limit this behavior of both manufacturers and sellers. And since this is not, they act simply: crisis, income falls - it means that we increase prices! And it doesn’t matter whether it is domestic products or imported, the share of imported components is great in it or not - we increase prices and that's it! .. Here, in my opinion, is the main reason why, when the ruble rate falls, prices for domestic products are also growing. Of course, in addition to this, regulated tariffs in the country are also growing, which also explains the overall rise in prices. But this is still not the main thing. There is a more fundamental drawback of the Russian economy, due to which prices for domestic products are rising in such periods.

If this will be used by large -scale, then, despite any consuming restrictions, we are guaranteed another take -off of prices

- A sharp reduction in domestic demand in the country, which has become the result of the fall of the population’s incomes, to what extent, according to your ideas, can restrain the acceleration of inflation, if you allow a new reduction in oil prices and, as a result, the next weakening of the ruble?

- Speaking restrictions, of course, can slow down inflation, which we are now observing. However, they still will not become an insurmountable obstacle to prices in the Russian economy ... In conditions of insufficient competition, simple logic continues to act: yes, due to the fall in demand, relatively speaking, only 30% of those who bought it before, but they buy it much more expensive! Moreover, as the situation worsens in the economy, consuming restrictions will have a lesser impact on the dynamics of domestic prices. Actually, we already passed this in the 90s: the standard of living of the population fell sharply, and prices in Russia continued rapid growth! Finally, from the point of view of explaining what is happening with prices will depend on the monetary policy of the authorities ...

With insufficient competition in the economy, both sellers and manufacturers, faced, as today, with a fall in demand, simply “lifted up” prices

- Do you mean a variety of proposals to expand the money supply in the economy? To realize a Russian version of “quantitative mitigation”, that is, financial stimulation of economic growth, which is actively carried out in the countries of eurozone or Japan, but has already ended in the USA? ..

- If those ideas that are now actively advanced even with quite such status people are prevailing ... I mean pumping the economy with money. Although they are trying to “ennoble” everything that this, they say, is project financing, for “targeted projects”, the Russian version of “quantitative mitigation” ... If it will be used large -scale, then, despite any consuming restrictions, we are guaranteed another take -off of prices.

But this is still not the main thing. There is a more fundamental drawback of the Russian economy, due to which prices are also growing during such periods for domestic products

- Annual inflation in the country, returning to the latest data from Rosstat, slowed down to 8%. At the same time, the results of polls conducted monthly on the order of the Central Bank show that the population itself estimates it almost three times higher - 21% as of February. It is clear that Rosstat tracks changes in prices for specific goods and services included in the consumer basket, but still the gap between statistics and the real sensations of people is too large . In your opinion, how, in principle, these grades are comparable?

- Such estimates are quite comparable in conditions when everything is calm. When there are no price shocks, inflation, which people are talking about on the basis of their subjective sensations, as it seems to them, approximately coincides with official assessments. But when price shakes occur, when prices beat very strongly along the wallet of citizens, their attention naturally first draws that it rises faster. And then those products simply fall out of the field of vision, the prices for which either almost do not rush or even decrease. This is also happening: when food or housing services are getting more quickly, people do not really pay attention to the fact that, say, household appliances are generally not very expensive-especially when it comes to domestic equipment, although there is a little. Therefore, in conditions of price shocks, inflation on subjective sensations of people will always be higher than correctly calculated by statistics at the prices of those goods that are presented in the consumer basket.