Russian Inflation Heating Up as Prices Jump 10% in 3 Months

(Bloomberg) -- Russian inflation remained high in the last week of March, with prices on foods and household products like soap and toilet paper jumping even as consumer demand was hit by sanctions imposed over the invasion of Ukraine. 

Consumer prices overall rose 0.99% in the seven days ending April 1, down slightly from 1.16% a week earlier, the Federal Statistics Service said Wednesday. Prices for sugar rose 5.1% on average in the week, while those for onions jumped by 8%. 

Overall, prices are up 10% so far this year, the agency said. The annual rate as of Apr. 1 was 16.7%, according to the Economy Ministry.

After panic buying fueled shortages early in the month, demand has slowed as price increases spread and many foreign companies pull out of the market. Retail sales are expected to have fallen as much as 10% last month, according to Goldman Sachs, with autos down over 60%. Early indicators for manufacturing and service sector reported contraction for March, citing sharp prices increases, weak demand and challenging conditions. 

What Our Economists Say:

“Even after the initial shocks from shortages and stockpiling, inflation is set to continue accelerating as sanctions ripple through supply chains. If you need a second line -- Households are feeling the impact immediately, but it could take time for the wider economy to adjust.

--Scott Johnson, Bloomberg Economics. Read: Short Panic to Long Recession -- Putin’s War

Dmitry Polevoy of Locko-Invest in Moscow said price growth in April “will break 20% and stay there for a long time,” even as consumer pain deepens.

“The demand reaction to the sharp price spike is visible in the slowdown in weekly inflation slowdown,” he said before the data release. “With a recession looming, the central bank may be ready to take its first steps in cutting the key rate already in April.” 

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With assistance from Bloomberg