Fewer companies, higher inflation

Rosstat’s weekly measurements show that annual inflation accelerated in May, returning to a local peak of 5.8–5.9%. Analysts of the Department of Research and Forecasting (RIP) of the Central Bank believe that the indicator will go to a steady decline not earlier than autumn: it is necessary for the rise in prices of consumer goods producers to pass its peak. At least until July, wholesale prices will increase retail prices. In addition, the DIP does not see an increase in the number of new companies against the background of economic recovery: while newly created companies are closing more often, this is obviously a pro-inflationary factor for the ultra-concentrated economy of the Russian Federation.

In Rosstat’s weekly inflation report, annual inflation from May 25 to May 31 remained at the level of the previous week, amounting to 5.8–5.9%, actually at the level of the local peak in March 2021. Inflation in May by April 2021 will amount to 0.4-0.6%, according to the bulletin of the Central Bank’s Department of Investment and Development “What Trends Talk About”, published yesterday. “This corresponds … to an increase in annual inflation to 5.7-5.9%,” analysts from the Department of Investment and Development are expecting, predicting its return to a steady slowdown in the fall “provided that the balance between short-term pro- and disinflationary factors is equalized.

On the sidelines of the St. Petersburg International Economic Forum, Deputy Prime Minister Andrei Belousov announced the rise in government inflationary expectations yesterday. “My estimate now is from 4.5% to 5%, it now roughly corresponds to the expectations of the Ministry of Economic Development (4.3% .— “B”), the Central Bank’s estimates are slightly higher (4.7-5.2% .- “B”) ”, – he said. “But we see what is happening on the world markets, and this, of course, inspires some concern to everyone,” explained Mr. Belousov, adding that “in the absence of export duties, there is a direct transfer of world inflation to domestic markets through export channels”.

However, as Kommersant has repeatedly noted, the rise in world prices for the main export goods of the Russian Federation is accompanied by a rapid rise in prices for raw materials and supplies. The RIP Central Bank also notes that in the context of a recovery in retail demand and increased inflationary expectations, manufacturers largely shift the growth of costs onto consumers. The department’s analysts point out that the rise in producer prices, calculated on the basis of a basket of consumer goods, weighted using the structure of citizens’ expenditures for calculating consumer prices, accelerated to 11.9% in April (see chart).

At the same time, historical data show the most significant transfer of the growth of wholesale prices to retail prices during the quarter, that is, support for consumer inflation may persist “at least until July”. “In these circumstances, easing sustained pro-inflationary pressures is likely to take more time. In particular, for a steady decline in consumer prices, it is necessary for the rise in prices of producers of consumer goods to pass its peak, ”the authors of the bulletin admit. Meanwhile, surveys of industrial companies in May record a slight slowdown in price dynamics, although one month does not guarantee its reversal (see Kommersant of June 2).

It is noteworthy that against the background of the increasing influence of incoming and outgoing prices on the economy of companies, the DIP does not show signs of an increase in the intensity of the creation of the companies themselves against the background of an obvious economic recovery, while there is a more intensive closure of young companies. This can negate the positive impact of another fact discovered by the R&D Department: during the crisis, companies with low labor productivity were most intensively closed. Against the background of the pre-crisis ultra-high concentration in the Russian economy (see Kommersant dated December 5, 2018), this only adds to prices of fundamental reasons for an increase.

Alexey Shapovalov