Inflation in February fell to a historic low

By the end of February 2017, the retail price of goods and services in Russia increased by only 0.2%, in annual terms inflation slowed down to 4.6%, follows from the materials of Rosstat.

In mid-February, Rosstat for the first time from September 2016 has announced that the level of weekly inflation fell to zero. Zero growth of consumer prices was recorded in the last week of winter 2017. As a result, the inflation rate for the month as a whole was a record low for February, as slow rates in late winter did not grow in the entire history of post-Soviet Russia. Still least considered the February inflation recorded in 2012 (0.37 percent), the highest level was observed in 1992 (38%).

Strongest in February, according to Rosstat, growth services (+0.3 percent), which is explained including growth of tariffs for journey in passenger transport (+1,9%). Less expensive products, excluding vegetable and fruit prices grew by only 0.1%.

Certain types of fruits and vegetables in February continued to grow rapidly in price. In particular, onions rose by 4.8%, grapes – on 4,6%, carrots, potatoes, pears, lemons – by 2.2-3.5 percent. At the same time registered a decline in prices for oranges (down 4.9%) and fresh tomatoes and cucumbers, beets and dried fruit (minus 0,3%-0,9%).

In addition, in February fell for almost all types of cereals (including buckwheat 1.8%), pork and poultry (minus 0,4%-0,8%), eggs (minus 2.7%), sugar (down 3.6%).

In the message Rosstat emphasizes that in five Russian regions saw a decline in consumer prices by 0.1-0.2%. At the same time in some regions of Russia the increase in prices was significantly higher than the national average. For example, in Chukotka, consumer prices increased overall by 0.6% and food prices by 1.7%.

In accordance with the law on the Federal budget, inflation in 2017 is expected to decline to 4%. However, in the beginning of March, Sberbank CIB analysts said that in February 2017 analizirovali level of inflation (the current level of monthly inflation adjusted seasonally adjusted and extrapolated to the year ahead) could fall below the mark of 4%.

“To explain the deceleration of inflation by the mere strengthening of the ruble is impossible, as during the whole month the exchange rate of the national currency was relatively stable. In our opinion, the main reason for the decline in the rate of inflation is extremely weak demand,” — said in a survey of analysts.

CB, in response to the inquiry, acknowledged that the level of monthly inflation based on the year in February was very low, and the slowdown of price growth has exceeded expectations. Among the reasons for the decline in the rate of inflation, the Central Bank attributed the strengthening of the ruble and a good harvest last year, as well as weak demand and high propensity of the population to savings.

Earlier, the head of the Central Bank Elvira Nabiullina warned that the decline in the inflation rate to 2% per year (following the example of most developed countries) may create new challenges for “emerging economy” of Russia.

If the overall price index is 2%, in some sectors, prices still are rising faster, and others may even experience deflation. Massive deflation is harmful: it reduces the incentives for investment, and in order to avoid a wide range of sectors, the inflation rate should be around 4%,” — said Nabiullina in an interview with Forbes.